As a Non-Executive Director (NED), it is important to have a good understanding of the business in which you sit on the board, as well as how the company goes to market. This knowledge can be crucial in providing valuable insight and guidance to the board and management team, and can help to ensure that the company is well-positioned for success. However, the question arises whether we should expect NEDs to have this level of understanding and if so, how it should be assessed, how business can support this and what benefits it will bring.
Firstly, it is important to understand that NEDs have a different role to Executive Directors. They are not involved in the day-to-day operations of the company, but rather provide an external perspective and bring a different set of skills and experiences to the board. However, this does not mean that NEDs should not have a good understanding of the business and how it operates. In fact, it is essential for NEDs to have a good understanding of the company’s strategy, operations, and the industry in which it operates to provide valuable input and advice to the board.
One way to assess whether a NED has a good understanding of the business is through their performance at board meetings. If a NED asks relevant and insightful questions, provides constructive feedback, and contributes to discussions in a meaningful way, it is likely that they have a good understanding of the business. Additionally, it is important for NEDs to stay informed about the company’s performance, industry trends, and any relevant news or developments.
Business can support NEDs in gaining a good understanding of the business by providing them with relevant information, such as financial reports and industry trends, and by giving them opportunities to meet with management and other stakeholders. Additionally, business can provide training and development opportunities to help NEDs gain the necessary skills and knowledge to effectively fulfil their role.
Having NEDs with a good understanding of the business can bring a number of benefits to the company. Firstly, it can help to ensure that the board is making informed and strategic decisions. NEDs with a good understanding of the business can provide valuable insight and advice to the board, which can help to ensure that the company is well-positioned for success. Additionally, NEDs with a good understanding of the business can help to identify potential risks and opportunities, and can provide guidance on how to navigate these.
Furthermore, having NEDs with an appreciation of the business can also help to improve the company’s reputation. They can provide valuable input and advice to the management team, which can help to ensure that the company is operating in an ethical and responsible manner. Additionally, NEDs with a good understanding of the business can help to build trust and credibility with stakeholders, such as shareholders and customers, they feel confident that they are capable of holding executive management to account.
In conclusion, it is essential for NEDs to have a good understanding of the business in which they sit on the board, as well as how the company goes to market. This knowledge can be crucial in providing valuable insight and guidance to the board and management team, and can help to ensure that the company is well-positioned for success. Companies can support NEDs in gaining a good understanding of the business by providing them with relevant information and training and development opportunities. Having NEDs with a good understanding of the business can brings many benefits to the company, including informed and strategic decision making, identification of potential risks and opportunities, and improved reputation.