Regularly ‘refresh’ company non-executives

Non-executive directors should be regularly ‘refreshed’ and have direct experience in the industry of the company they are advising, research finds.

The report, A Good Piece Of Advice – How You Can Use Non-Executives To Unlock Value In Your Business, released by the private bank Coutts, finds that 55 per cent of entrepreneurs say non-executives should have limited contracts.

This compares with one third of non-executive directors (35 per cent) who say individuals should not remain on the board when they cease to add value.

The report also finds that although 57 per cent of those said a broad commercial career experience was a pre-requisite for the role, the research suggests non-executives need to have specific skills such as starting and selling a business or raising finance to be effective.

Gresham Private Equity investor Paul Franks comments, ‘The role of a non-executive comes down to what is needed in the business – whether it is guidance, access to people or someone with the skills to build it up.’

The report explains that the appointment of a non-executive is ‘best linked’ to a particular goal. For example a company seeking to break into a new market may hire a non-executive with contacts or trading experience, while a business planning to raise funds from private equity or through flotation should look at someone with City connections.

When it comes to judging the suitability of a non-executive director to fulfil a role, the report cites the person’s track record (89 per cent) as the number one deciding factor, while strategic strength (73 per cent) closely follows in second place.

‘The implication here is that it is the ability of non-executives to leverage previous experience and inform the strategic decision-making process that is highly prized,’ the report notes.

More than half (55 per cent) of entrepreneurs say they would use recruitment agencies to source the non-exec for their businesses, far behind the preferred route of a referral (88 per cent).

Moreover, non-execs and entrepreneurs don’t see eye-to-eye on how they should be paid for their work. No surveyed entrepreneur favoured payment in shares alone as the way to remunerate non-executives, compared with 10 per cent of non-execs who favour this form of payment.

It also finds a significant minority (16 per cent) of business owners are concerned that the recruitment pool is too narrow.

The report interviewed 50 UK entrepreneurs and non-execs for the research.

Todd Cardy

Todd Cardy

Todd was Editor of between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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