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The role of the non-executive director

M U R R AY S T E E L E

Introduction

I am frequently asked: ‘What is the role of a non-executive director (NED)?’ In 1996, when we were undertaking research prior to launching the Cranfield NED Seminar, the answer was far from clear. We were told jokes such as: ‘What’s the difference between an NED and a supermarket shopping trolley?’ Answer: ‘One can hold large amounts of food and drink while the other is useful for taking the shopping home and occasionally has a mind of its own.’

This lack of awareness, in conjunction with recent corporate scandals and growing shareholder activism, has put a greater focus on the role of the NED. The role was significantly clarified by the Higgs Report in 2003. Today I believe the answer to the question is much clearer and can be best summed up by the following quotation: ‘The fundamental job of NEDs is to see that the company is properly run, but not to run the company.’ I am unaware of the source of the quotation, but I believe it describes accurately and appropriately what is a complex and demanding role.

The importance of the NED has changed significantly over time. This quotation sums up how the role used to be viewed:

Coote got me in as a director of something or other. Very good business for me – nothing to do except go down to the City once or twice a year to one of those hotel places and sit around a table where they have some very nice new blotting paper. Then Coote or some clever Johnny makes a speech simply bristling with figures, but fortunately you needn’t listen to it – and I can tell you, you often get a jolly good lunch out of it.

How complex and demanding the role is today is aptly portrayed by this job advertisement:

Experienced professional required for demanding role in small but influential team. Although the role is part time (up to 18 days a year) there is scope to make a significant contribution to a multi-million pound operation. Commensurate with this, the successful candidate will need to be fully versed in stakeholder issues and may be required to fall on his or her sword as appropriate.

To be successful, the candidate must have an extensive working knowledge of corporate finance, business planning, financial analysis, auditing,

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