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The NEDA Handbook Spotlight - What makes an effective NED?

There may be differing views about the characteristics that are desirable in a NED, but individuals should feel confident that they have the attributes that are needed to contribute value to the board and the company. In this spotlight, we highlight some key sources on what it means to be an effective NED, yielding insights on how you can best harness those qualities.

The Guidance on Board Effectiveness comments that ‘non-executive directors should possess a range of critical skills of value to the board and relevant to the challenges and opportunities facing the company’. Diversity reduces the risk of ‘group think’.

A blog on the ICSA (now CGI) website by its Business Development Director suggested five essential qualities that a NED should have, including:

  • Big picture thinker: A NED should be capable of ‘seeing the big picture’ and thinking strategically. This presumably is a major reason why the individual has been invited to become a NED – to contribute to strategic discussions of the board by bringing experience or specialist knowledge to the debate.
  • Governance knowledge: For companies that are expected to comply with a code of corporate governance, knowledge of the code and of governance issues in general is necessary. Much of the involvement of a NED in the company may well revolve around governance duties, such as membership of board committees.
  • Independent mindset: A NED should be independent-minded and should be willing to express personal opinions and put forward personal arguments on issues discussed by the board.
  • Ambassadorial role: NEDs should be able, when required, to represent the board or their company to shareholders and other stakeholders. In some cases - for example, in the case of the board chair - it may be necessary to represent the company to the media and general public.
  • Energy and commitment: A non-executive directorship is not a comfortable and lucrative sinecure. The role requires energy and commitment during the period of time that the individual has agreed to put into the company.

The Guidance on Board Effectiveness suggests that the board should consist of individuals who possess a range of ‘softer skills’, which include: intellect, critical assessment and judgement; courage, openness and honesty; tact; ability to listen; ability to forge relationships; ability to develop trust; and strength of character. 

Although there are different ways of analysing the skills required for an effective NED, perhaps these can be summarised as follows:

  • A NED must contribute constructively to the work and decision-making processes of the board and in doing so promote principles of good governance and ethical business behaviour.
  • A NED must have interpersonal skills, with an ability to communicate and listen to others, and skills in the art of persuasion and consensus building.
  • A NED must also bring specific business skills to the board. This may be business acumen and sound judgement, an ability to think analytically and creatively, and possibly also a specialism that other board members do not have (such as ICT skills).
  • Effective NEDs should earn the respect of their board colleagues.

Learn More:

You can read more about what makes an effective NED, with guidance on harnessing these qualities, in our chapter on 'Becoming a NED' in the Non-executive Directors' Handbook, available at the link here (Premium Members Only). 

 

 

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