Paul Collins is the Chairman of the Board of Directors at Equiteq and has held a number of non-executive directorships.
Non-executive directors (NEDs) can play an important role in helping a business navigate its way through often-choppy waters and grow. They can provide valuable advice, but only if they have the right skills and experience. So how should a consultancy aiming for growth and eventual sale choose an NED?
First off, unless your business is well past the $50m mark in revenue, you don’t really need an NED and can instead have a board advisor. Until a firm is well over this size, it won’t have the governance issues to consider that mean an NED is needed.
Becoming an NED brings with it all the legal liabilities of being a formal director, but arguably without much of the additional information that directors have. In my experience, it works best for an NED to attend board meetings quarterly, with informal communications in between these times. If the NED attends the monthly board meeting then they can quickly become bogged down in the operational issues, rather than provide the strategic insight that they should be concentrating on. But if they don’t attend these monthly meetings, yet have the same legal liability for the company as the executive directors, then this can put many people off the role.