Board Players — Challenges for Independent Non-Executive Directors

Praesta has a thriving Board practice — we work successfully with individual Chairs, CEO's and Directors to help them do the best possible job. We also conduct sensitive, insightful board reviews that enable Chairmen and Directors to identify aspects of their board’s work that, if done differently, will improve its effectiveness.

Many executive and non-executive directors (NEDs) who join a board for the first time find it is an experience for which they are relatively unprepared. Praesta can help them comprehend and become confident in their new “cabinet” role, and thereby avoid early pitfalls and make a valuable contribution.

All directors have an equal duty of care for the continued good health of the host organisation, today and tomorrow. Formally, there is no distinction in law between a non-executive board director and an executive one. Nonetheless, our experience is that the roles most pivotal to board effectiveness, and the most challenging to perform, are those of independent non-executive directors. That is principally because:

• The burden of independent scrutiny that NEDs carry can lead them to operate more as inquisitors and corporate policemen than is appropriate. NEDs need to balance challenge with appropriate support and an understanding of executive management issues.
• To exercise informed, independent judgement and engage in constructive challenge, NEDs have to gain knowledge and insight from sources within and beyond their organisation without going “native”. This can be a poorly signposted journey that requires dedication, persistence and, occasionally, ingenuity.
• NEDs can easily be marginalised such that they make little impact on the organisation and its agenda.

Independent directors are greatly helped in the pursuit of their obligations by the transparency and openness of the Executive team. By contrast, a defensive Executive team that controls access to information and people and is overly sensitive to alternative input, is likely to get poorer value from its independent directors. They will be less well equipped to challenge and, if the chances of a dismissive or negative response are significant, become reticent do to so because the stakes are too high. They may resort to backroom gossip instead.

We have found a number of best practices that are adopted by independent directors who rise well to these challenges. As an independent director, it pays to:

• Find out for yourself by “walking the business”, talking to a wide range of people, understanding the sector, looking out to the marketplace, and getting expert input.
• Be diligent, read a wide range of material and listen carefully.
• Check your understanding, ask good questions and persist until you get good answers.
• Form an independent perspective, avoid group-think and make up your own mind.
• Remember your duty of care to the business and its principal stakeholders. Ensure board and committee agendas give time and attention to the issues that matter most.
• Contribute constructively, make your own points concisely, explain where you are coming from, acknowledge and build on good points made by others, use neutral language and thereby generate “light” not “heat”.
• Work outside the board room as well as inside. Connect with others informally as well as formally, so as to get to know key executives and other directors.
• Look ahead, re-educate yourself and upgrade your skills to keep current. Use your old war stories sparingly.
• Get good feedback and act on it.
• Know when it’s over. If you cannot subscribe to key decisions or have reservations about how the board runs, then stand down. When others take little notice of what you’re saying and/or you feel your ability to contribute has started to wane, then engage the chair’s help to leave on a high with the board’s goodwill towards you intact.