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Non-executive role to rapidly evolve, say experts

The role of the non-executive director is set to evolve rapidly to respond to the demands of the post-recession economy and higher standards of corporate governance.

According to research by Korn/Ferry, the requirements of the role have changed rapidly over the last seven years, as a greater time commitment, broader skill set and deeper technical capability is required to create a vastly expanded brief.

The evolution of the role has major implications for the number of non-executive roles an individual can take on, which is significantly shrinking the talent pool and affecting board composition.

In a report entitled “What Makes an Exceptional Independent Non-Executive Director?”, it was found that the core characteristics of a non-executive Director were independence, ability to challenge, and excellent communication skills, although they are insufficient in isolation.

Broader and deeper capabilities in risk, numeracy/finance and technology have moved swiftly up the priority list, a trend noted by Tim Stevenson, Chairman of Johnson Matthey, “Financial literacy and economic literacy are more important than ever in today’s climate.”

Against a background of increasing regulation and improved governance, these trends are likely only to accelerate.

Many now believe that it is unrealistic to expect non-executives to shoulder the added responsibility of the position without added compensation, but pressure from regulations over corporate pay has left many businesses unable to do this.

Richard Emerton, Head of Korn/Ferry’s Board Practice in EMEA said: “We last looked at this area in 2005 and the evolution of the role has been swift and broad-ranging.

“While Boards still prize traditional NED qualities such as independence and experience, the additional skills and responsibilities identified in this new report are significant and striking.

“With far greater technical demands in areas such as risk, finance and technology being layered on, it is clear that the days of gifted amateur are long gone.”

Richard now believes that as the role of non-executive director evolves to require an increasingly significant commitment of time and energy, the future will involve fewer, more involved roles. This will result in questions over the size of the non-executive talent pool, with major implications for the recruitment process.

He added: “The need for high quality non-executive directors has never been greater and selection, training and remuneration of non-executive directors have become critical issues for all Boards.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .