The fight for top quality non-execs
New skills such as understanding risk, finance and IT are now needed
By Ben Griffiths | Published 13:06, 10 July 12
Britain’s ‘shareholder spring’ clearly demonstrated that activism is on the increase, with a correlating rise in the significance of non-executive responsibilities.
That means the role of a non-executive is becoming more onerous, with longer hours, a need for broader skills and the necessity to have a deeper understanding of a company’s culture and behaviours and the challenges these may present.
According to research by recruiter Korn/Ferry, these factors have meant individuals are restricted in the number of non-executive roles they can take on. That has clear implications for the talent pool. Not enough people are available to fill the non-executive posts in the boardrooms of UK plc.
Korn/Ferry has questioned 50 leading chairmen, chief executives and non-executive directors to ask what makes an exceptional non-executive. Traditionally non-executives were recruited for their independence, ability to challenge and excellent communication skills.
The best were well respected and experienced business people who could guide and offer advice, while keeping check on wayward chief executives. Of course there have been high profile failures - Royal Bank of Scotland is a good example - when non-execs failed to keep errant bosses under control.
Sir John Peace, chairman of Standard Chartered bank described the basics of true independence and integrity as still being of fundamental importance. However, he says that all the new, additional responsibilities have made the job challenging and time-consuming.
New skills include understanding risk, numeracy and finance and technology - all of which are only likely to become more important against the backdrop of more regulation, improved governance and greater scrutiny.
Ken Olisa of Restoration Partners described the old non-executive role as akin to joining an exclusive club. Today, he says, it’s a more serious job.
With the increased commitment and skill requirements comes the inevitable question of remuneration. Non-executives were typically paid a relatively small amount given they worked a part-time job. This also allowed them to rack up a number of non-executive directorships. As that is now increasingly difficult to manage, perhaps non-exec candidates need to be offered more to attract them to the job?
While the pay scales should never match those of executive directors, high quality non-execs must be given some incentive to put themselves forward for such a key position.
They are there to offer much more than they previously did and investors are expecting non-execs to act as proper stewards in a truly independent manner.
The days of cosy old-boys clubs with serial non-executive directors looking after each other are long gone. The fight for top quality non-executives will surely begin to heat up and it’s vital boards pay attention to proper selection, training and remuneration to attract the best talent.