Making a big difference in the boardroom
Aug 12 2009 By Andrew Hebden, The Journal
The Journal is once again celebrating the contribution of non-executive directors this year and, as Andrew Hebden reports, the timing could be especially pertinent as the recession continues to cut deep in the North East economy.
Mr Ramsbotham added: "Non-executive directors are vital. They bring a breadth of experience and expertise to a board of directors which is not available to the executive.
"The fact that they have ‘been there and done that’ – and learned from it. There is an Indian saying that good judgment comes from experience and experience comes from bad judgment! That is what we are looking for."
Graeme Summers, head of investment banking at new sponsors Brewin Dolphin, agreed.
"Brewin Dolphin is sponsoring the Non-Executive Director of the Year Award this year because it recognises the essential role non-executive directors play in the development of businesses. The investment banking team at Brewin Dolphin, which has a material base in Newcastle, works closely with the non-executive director community throughout the UK.
"One of the key benefits of many non-executive directors is that they have the experience of working through the recessions in the 1970s, 1980s and 1990s and can play a vital role in helping companies through the difficult times we face today.
"The current market conditions mean that companies may need to explore different funding options and strategies. The trade record and reputation of a non-executive director can give confidence to financial institutions and make a positive response more likely. We have found this to be particularly true in sectors with younger and more inexperienced executive directors."
Mr Summers added: "Non-executive directors can bring a fresh pair of eyes to the boardroom. As well as ensuring adherence to corporate governance issues they are able to use their experience to avoid common pitfalls and, perhaps, help the executives spot opportunities. Their independence also gives them an important ability to ask questions and challenge assumptions that executive board members may feel unwilling to face."
Lucy Armstrong, chief executive of fellow sponsor The Alchemists, described non-executive directors as "a vital component in the DNA of a successful business".
"They add value to the enterprise, prevent mistakes and deliver shareholder value," she said. "As a business develops, it is increasingly important that it uses its non-executive directors well.
"They focus the board’s attention on strategic rather than operational issues and they make sure that robust processes are in place. The mark of a good non-executive director is when the board continues to listen to him or her even when they disagree strongly. Their opinions are valued and they are respected as a valuable sounding board.
"A trusted and respected non-executive can add real value outside the boardroom too. They are one of the few people the chief executive can use as a sounding board, to test ideas and think out loud.
"This confidential relationship can be an invaluable resource and one where he or she can receive constructive feedback and encouragement.
"The value of the non-executive director can be measured by the CEO’s willingness to pick up the phone or pen and email and seek his or her views, irrespective of the outcome."
Andrew Davison, partner at sponsor Muckle LLP, said a good non-executive director can play a critical role in making sure companies have a clear view about where they are going.
"The presence of non-executive directors means that board meetings do have to take place. This helps the executives to step back from the day-to-day pressures and look at the business as a whole, whether they have a clear strategic view or are carrying on regardless of the changing world around them.
"Not only do the non-executives give support and guidance but they also make sure that discussions do take place and that decisions are taken.
"The non-executive director brings a fresh pair of eyes to the make-up of the board, too. This can be particularly valuable in family businesses where people may sit on the board for reasons other than their expertise.
"The effective non-executive will be able to use his/her experience to help the board to identify the skills the business needs if there are any gaps that need to be filled."
He added: "During these difficult economic times, when companies depend on the support of their bankers, the backing of an independent, trusted non-executive director is extremely persuasive. The individual’s commitment adds weight to the reputation of the company and the banks can be influenced by the fact that the non-executive director is prepared to put his or her own reputation on the line, too."
