Have you got what it takes to be a non-executive director?
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Don’t boast or get too cocky. The ideal non-executive director is, apparently, someone who is quiet, knowledgeable and competent.
Becoming a non-exec is the holy grail for many senior executives planning their retirement. A step back from the stress of a full-time corporate role, it is a valuable extra source of income and a way of using your skills and experience to help other companies or industries in your later years.
Spencer Stuart, the executive search company that fills hundreds of board roles each year, says modesty is a virtue, advising that suitable candidates need a “low ego” and should not be dogmatic.
To stand a realistic chance of getting a first role as a non-exec it is vital to use your business network while you are still employed. But there is a caveat: do not look too close to home. Non-execs should, ideally, be independent. Under the UK corporate governance code, non-execs should not be former employees or people who have had a “material business relationship” with the company whose board they want to join.
Talk to the non-execs on the board of your own company and find out how they got there. Some companies encourage executive directors to offer their non-executive services to other businesses because it broadens their experience and can make them better at their day jobs. It leads to a cross-fertilisation of ideas and insights into the best practice of other industries.
Once you have persuaded your fellow executives that you should be allowed to offer your services to others for a few days a month, you must then assess your skills and decide where they could prove useful. Chairmen prefer directors who have had full balance sheet responsibility and experience of strategic development and mergers and acquisitions.
It is wise to use industry executive search professionals to assess and refine your CV before you think of approaching another firm. Your résumé needs to say what experience you can bring to a board, what skills you have and the extent of your understanding of corporate governance codes and guidelines. You must also set out the key strategic successes of your career.
Befriending executive headhunters is a good starting point. They can tell you what skills and qualities are currently in demand. Boards need to have a balance of skills, experience and knowledge.
Candidates for non-executive posts need the knowledge, experience and independence of mind to challenge and ask the right questions. You should also consider taking a course, such as the FT’s own non-executive director programme, or the ones run by the Institute of Directors. Hundreds of executives take the IoD courses each year. Among the benefits is meeting other people on the same quest.
“The role of a board member is increasingly complex, and requires specific skills and knowledge,” says Dr Roger Barker, head of corporate governance at the IoD. “It is not merely the natural extension of an executive career. Although the law defines few prerequisites for becoming a company director, those who wish to exercise their role in a professional manner will recognise the need for a significant investment in their own skills and competencies before accepting a board-level mandate.”
For some, a charitable role can make the transition from day job to independent director easier. Housing associations, health trusts, charity and public sector boards are desperate to find people with good commercial experience. A role as a trustee may be onerous and pay very little, but it can be the nursery slope for a directorship on a publicly quoted board.
There has been a push to get more women on to company boards over the past decade. The Spencer Stuart 2017 UK Board Index published in December reported that 34.7 per cent of all non-executives in the top 150 companies were women compared to 16.7 per cent in 2007.
For the first time, the average age of non-executives has broken through the 60-year threshold. There is also a large proportion of newcomers. Those who have never served on a board before make up 34 per cent of newly-appointed directors.
Over the past decade, the average fees for non-executives have increased by 41 per cent to reach £67,655 per year. Roles at smaller companies pay the least and are likely to require more of you time. Non-execs must be prepared to commit the time needed to fulfil the demands of the job and be aware of their duties and responsibilities. This is likely to be 15 to 25 days a year. It is hard work, especially in the first few months and will involve much more than simply attending scheduled meetings and reading in preparation for them.
A background in the relevant sector can be advantageous but is not essential. Under the corporate governance code, at least half of the board directors in larger companies should be non-execs. Smaller companies should have at least two.
The composition of leading companies such as HSBC, which has 14 non-execs, and Barclays, with 10, shows the value these companies place on their contribution.
Professional bodies sometimes recommend candidates. If a board is looking for an accountant it may talk to audit firms or accountancy bodies for recommendations. Non-execs with human resources skills are often headhunted through their professional bodies or industry events that they are involved in.
Above all, a good non-exec needs diplomatic skills. They need “emotional intelligence” — the ability to evaluate people’s characteristics and their agendas quickly and thoroughly. They should never appear to be domineering, especially when dealing with directors who are unused to being challenged. Equally, they should never forget that it is their job to hold the board to account.
Lindsay Cook is co-founder of consumer website MoneyFightClub.com and co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor to look into, email firstname.lastname@example.org
For further information about the FT’s Non-Executive Director Programme, visit non-execs.ft.com