Many recent high profile incidents involving corporate mismanagement have significantly raised the role of the non executive director (NED). The Higgs report of 2003 clarified the role of the NED, and although aimed at large business there are a significant number of role that can be beneficial to smaller businesses, commonly classified as small to medium sized enterprises, or SMEs. Blue chip listed companies typically have more non executive than executive directors, a position that encourages proper corporate governance independent of day to day operational issues. Whilst SMEs rarely need significant numbers of NEDs, a single NED can assist the company and its shareholders in achieving their goals and aspirations by providing an experienced "cool headed" opinion on contentious issues. Issues that particularly benefit the input of a NED include business strategy, governance, legal compliance, corporate social responsibility issues and difficult issues such as senior management team remuneration and capital expenditure decisions.



So what are the criteria for a successful NED appointment? Of all the many qualities to be considered in drawing up a detailed job description, organisational "fit" is likely to be a priority. This really comes to down to what your organisation is aspiring to achieve. Regardless of core NED functions, if your organisations key objective of the term of appointment is new research and development, then a NED with a background in finance is unlikely to permit them to make major contributions to your business. Appoint someone with a background in your type of business, not necessarily your industry (due to obvious conflicts of interest) who you believe will be suitably challenging of your board, with formal training in the role of a non executive director.

A NED has a significant fiduciary duty to fulfil, and will therefore seek to influence governance decisions for the good of the company in an impartial manner. The legal liabilities are equal to that of a executive director, and therefore complete disclosure of operational issues will be required for them to fulfil their duties. The term of appointment will commonly be fixed, with terms from 2 to 5 years being commonplace. Remuneration clearly has a bearing on the decision of a n SME to appoint a non exec: compensation for a non exec providing 2 days a month of input into your business will be valued at between ?6,000 and ?15,000 a year, depending on their experience and the time commitment your require. Remember that a NED is their to help the business achieve its objectives, whether that's as basic as ensuring that there is a properly prepared business plan in place, and essential legal duties are being fulfilled, or bringing an expert to the board in a particular area such as environmental compliance, change management or IT. Its an investment in the business, not an unnecessary overhead!