Guest-blog: Roger Phare – A Nod to the NED – the key dynamic of the modern board

We welcome back Roger Phare as our guest blogger, who is an accomplished Global Executive Director, equipped with a commanding track record over the past 37 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’.

Roger has been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

In the third of this series (view Part I and Part II ), we are going to look at the role of the Non-Executive Director (“NED”), which is a highly debated subject in today’s modern board.

To provide some background, before I hand you over to Roger, as an Independent Non-Executive Director and Executive Adviser on several companies, I talk with experience across the list of attributes required of a non-executive director, which is so long, precise and contradictory that there cannot be a single board member in the world who fully fits the criteria.

They need to be: supportive, intelligent, interesting, well-rounded and mature, funny, entrepreneurial, steady, objective yet passionate, independent, curious, challenging, and more. They also need to have a financial background and real-life business experience, a strong moral compass, and be first class all-rounders with specific industry skills.

Chairmen and chief executives should use their NEDs to provide general counsel – and a different perspective – on matters of concern. They should also seek their guidance on particular issues before they are raised at board meetings.
Indeed, some of the main specialist roles of a non-executive director will be carried out in a board sub-committee (particularly the remuneration and audit committees), especially in listed companies.

The key responsibilities of NEDs can be said to include the following:
Strategic direction
As ‘an outsider’, the non-executive director may have a clearer or wider view of external factors affecting the company and its business environment than the executive directors.
The normal role of the NED in strategy formation is therefore to provide a creative and informed contribution and to act as a constructive critic in looking at the objectives and plans devised by the chief executive and the executive team.

Monitoring performance
Non-executive directors should take responsibility for monitoring the performance of executive management, especially with regard to the progress made towards achieving the determined company strategy and objectives. They have a prime role in appointing, and where necessary removing, executive directors and in succession planning.

Remuneration
Non-executive directors are also responsible for determining appropriate levels of remuneration of executive directors. In large companies this is carried out by a remuneration committee, the objective of which is to ensure there is an independent process for setting the remuneration of executive directors.

Communication
The company and its board can benefit from outside contacts and opinions. An important function for NEDs, therefore, can be to help connect the business and board with networks of potentially useful people and organisations. In some cases, an NED will be called upon to represent the company externally.

Risk
NEDs should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible.

Audit
It is the duty of the whole board to ensure that the company accounts properly to its shareholders by presenting a true and fair reflection of its actions and financial performance and that the necessary internal control systems are put into place and monitored regularly and rigorously.
An NED has an important part to play in fulfilling this responsibility, whether or not a formal audit committee (composed of NEDs) of the board has been constituted.

Now I would like to hand over to Roger!

Thank you Geoff, today I would like to discuss the role and ‘A Nod to the NED – the key dynamic of the modern board’.

Of all the Board positions the Non-Executive Director (NED) role is undoubtedly the most confusing. Not so much as to the expected outcomes of growth, compliance, shareholder returns and social responsibility but more as to the background and dynamics of the modern NED.

Why confusing?

Surely the NED role is the most historically formulated, culturally cultivated and legislatively defined of all board member roles.

Yet instead of being well defined and well-structured the NED requirement seems to be all over the place.

Part of the issue is that demand has rapidly increased due to factors such as legislation, compliance and business growth. This has spread the net further afield and created a demand over and above the previous norm.

The result of this demand there has seen “NED Membership” organisations springing up. I recently read as part of a membership promotion the following excerpt:

“If you have the right amount of experience to offer, you could become a Non-Executive Director. This could be an especially good option if you are approaching retirement because it can be a useful way to earn money without the pressures of being involved in the day-to-day decision making of a business.”

Whoa! This conjures up images of geriatric un-prepared old-boys rolling up for a four-hour board meeting; pontificating and story-telling before retiring to their local club for a large brandy and an afternoon nap in a dark leather padded armchair!

Nothing could be further from the truth for the modern NED. Guidance around “day to day” decision making is a critical part of the NED role. Four hours in the Boardroom can equate to four days spread pre and post meeting guiding and assisting the CEO & executive team. It is serious business.

A related problem is that somehow a “one size fits all” approach to NED requirements has become the prevailing attitude. Other than “Chair” type roles it seems that there is little demarcation in the nature of the role nor organisation in which the NED is required.

Contributing to this is the definition of organisation types. Most understand the concept of listed or private organisations and the duties, responsibilities and remuneration levels required by and from the NED’s. When community organisations are brought into the mix then things really go off the rails.

It starts with the concept of “Not for Profit”, equating with the concept that NED roles being “Volunteer”. To start with, Not for Profit organisations should be re-branded “Not for Dividend”. In other words, they need to be governed and run the same way commercial organisations operate with a view to making a surplus; the only difference is that those surpluses are distributed to beneficiaries rather than shareholders.

This topic is probably the subject of a whole new thread but the point is that community organisations need directors with the same level of skill and due diligence as those in the commercial world.
The question is when an ad appears that asks for applications for a NED “Volunteer, expenses only”, who is going to apply?
Yes, there is a small percentage of experienced and talented individuals who are prepared to provide their time on a “pro bono” basis and these people are to be commended. Simply having time on one’s hands and looking for an activity is not necessarily a qualification for a board position.
Even worse, to a degree, is the concept of applying for volunteer positions to “gain experience” as a Board member. This can lead to frustration and disappointment for all parties.

Yet it is not all doom and gloom. Demand for high quality Non-Executive Directors is increasing and it is generally acknowledged that the keys to success are the right recruitment, support, training and ongoing engagement. With these factors in place, NED’s can add significant value to all types and size of business.

So, here’s a nod to the new breed NED – exciting times ahead!

Roger Phare

You can contact Roger Phare via LinkedIn: Roger Phare on LinkedIn
or by email:
roger phare @ gmail .com
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Guest-blog: Roger Phare – The qualities and experience needed to getting the right advise on the Board

Roger Phare

In the small business world, there is a lot of talk about whether a company should have a Board of Advisors (Advisory Board), and if yes, what the composition of such a group should be. In my time in the small and medium enterprise (SME) world, I have been exposed to and worked with hundreds of companies, a small percentage of which have had a Board of Advisors. Whether having such an advisory group makes sense depends a lot on the business and more importantly, the CEO and senior management team of the business.

In my opinion and I state this with wisdom, one of the smartest growth initiatives a business owner can implement is an advisory board: a hand-selected group of advisors that believe in your leadership, are aligned with your culture and mission, and are committed to your success.

The vast majority of business owners who implement an advisory board fail to see a strong return on investment because they have not followed guidelines to recruiting the right advisors, and have not set them up for success.

Today I have the pleasure of introducing another Guest Blogger, Roger Phare, who is an accomplished Global Executive Director, equipped with a commanding track record over the past 37 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’. Roger have been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

Roger is going to talk to us about the qualities and experience needed to getting the right advise on the Board.

Over recent years we have seen the rise of the Advisory Board concept, a trend that reflects the changing nature of modern organisational leadership and governance. Thinking further on this, the obvious question is why? What has changed in public and private Boardrooms to see such a demand for specialist knowledge and expertise?

The answer perhaps dates back some twenty or even thirty plus years. Up until the late eighties board members generally came with experience related to the company’s market or industry, together with all round leadership and business skills. This had largely been the post war formula, in other words Executive or Non-Executive Directors in 1958 had much the same attributes of those in 1988 – then everything changed.

We had Wall Street, Enron and the Sub-Prime less than twenty years apart. Not co-incidentally, this timeframe was paralleled with the rapid rise of business computing and the internet. Ironically, while technology was an enabler for business growth it became an inhibitor for effective all-round board performance. Directors became much more focussed on financial and legal due diligence as the regulators took control. Boards became largely the keepers of compliance and governance, with their members skilled and qualified in these disciplines. So what happened to the much needed advice in areas such organisational structure and market direction?

Enter the Advisory Board, bringing relevant expertise and experience in key strategic areas.

There is perhaps another reason for the rise of the advisor(s) in the boardroom. Casting the mind back to our pre-1988 Director, past industry experience was a key attribute for the senior board member. Being five to ten years away from a hands-on roles was not a major issue – as business and market fundamentals remained consistent. Today key industries are in rapid growth mode that did not even exist five to ten years ago, with “here and now” expertise required.

So Advisory Boards are most likely here to stay and ideally should complement our incumbent NEDs or Exec Directors; the key is find the right balance and consistency.

You can contact Roger Phare via LinkedIn. Roger Phare on LinkedIn or by email: roger phare @ gmail .com (remove all spaces)