Companies across various industries are recognising the immense value that NEDs (Non-Executive Directors) bring to their boards, helping to drive growth and ensure long-term sustainability.
And, though it was more common to only have NEDs in listed companies, we are now seeing them in private companies, too, including smaller ones.
While a large corporation might appoint a NED to maintain the highest standards of corporate governance, the reasons differ slightly for a smaller corporation; they are instead based on seeking evidence-based assurance and holding the executives to account, as well as providing business experience, object advice and credibility to the SME.
Speaking to Shalini Khemka CBE, CEO and Founder of the entrepreneurial community E2E, she shared her expert insights on how and why NEDs can be important for businesses.
What is a Non-Executive Director?
A Non-Executive Director (NED) is a part-time member of a company’s board of directors, sharing in the collective responsibility for the organisation’s success.
While NEDs regularly attend board meetings, their role can extend beyond this to include diverse tasks such as leading special projects, engaging with shareholders, and representing the company at external events.
Unlike executive directors, NEDs do not have operational duties within the company and are not classified as employees. This can make their relationship with a business more informal, such as with the sharing of information occurring via a more casual method of communication like phone calls instead of formal, arranged meetings.
According to Khemka, a NED can contribute significantly to a company’s growth: “Historically, NEDs have had a large focus on a company’s corporate governance, but now, they are often more heavily involved through supplying expert advice.
“Along with the professional advice they provide to businesses, the emotional support that comes with this is invaluable.
“Through their encouragement, listening and providing reassurance where necessary, the confidence and morale of the executive teams can be improved as a result. Ultimately, this can foster a more cohesive leadership team.”
NEDs offer an outsider’s opinion
An independent perspective on the business, detached from daily operations, is a key advantage of Non-Executive Directors.
By their nature, NEDs should have a wealth of experience to offer a business, preferably gained from involvement with an array of relevant organisations. This feeds into why and how their consultative services become so valuable to a company.
“With their unbiased perspective as someone that is less directly involved in a business, NEDs can offer a more wide-spanning view that provides alternative knowledge and experience – a priceless addition to a company’s growth,” explains Khemka.
This impartiality helps in situations where the executive team may be struggling to reach a consensus, or where outside knowledge and experience is needed to diversify a potentially narrow-minded viewpoint.
NEDs can connect businesses with vital contacts
Along with the extensive knowledge that a NED can bring to a company, they can usually provide access to a wide pool of potential contacts.
“A NED can provide the resources to be able to create relationships with more stakeholders, such as customers, suppliers, and potential partners,” says Khemka.
“Whether the contacts are related to markets you want to expand into, are business contacts that would help an SME to grow at a quicker rate, or they are even contacts that would be able to offer their own advice to your company with their own unique knowledge and experience, they are likely to provide value to your business and its operations.”
