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The Need for Non-Executive Directors

Why is the word 'why' not used more in British boardrooms? I suggest because the constituent members of the board are all experts in their own field; each has respect for the other's abilities and knowledge; all appreciate that the well being of the company is a common goal; so consequently they don't question each other as deeply as they could ­ or should.

Yet questions should be asked, and the most effective method of introducing this additional element to board meetings is the appointment of a non- executive director to ask them; somebody separate from the company who comes without the baggage of the loyalties and sensitivities that usually build up as companies mature and executive directors can become a somewhat insular unit.

This may appear cynical, but it is a fact that the longer a board of directors works together the less they may examine their individual roles, their achievements, their talents and their shortcomings. Yes, we all know that boardroom 'rows' can take place, but more often than not they are personality-based rather than involving true company concerns.

The introduction of a non-executive director is an effective way of bringing a breath of fresh air into the equation, another pair of eyes to identify problem areas and an inquisitive mind that is able to question, to analyse and provide constructive criticism. They will not necessarily provide answers ­ these can be deduced by the main board members ­ but they may provide the impetus to create questions that may never be asked otherwise without the presence of an 'outsider'.

Non-executive directors come in many guises, but all have common elements: wide business experience and acumen, an inquisitive mind, knowledge and contacts. It really goes without saying that the broader the industrial and commercial knowledge of the person the better. Essentially they will possess talents and expertise missing from the executive team enabling them to inject different thinking and identify the areas where the company is not achieving full potential.

Boards must be prepared to be criticised, their shortcomings exposed and their systems scrutinised and their forward planning questioned. And they must be prepared to pay for this essential attitude. A good non-executive director will have the well being of the company at heart; it will be paramount in his or her thinking to do what is best for the company ­ and the more familiar with the company the non-exec becomes, the deeper the involvement.

One of the first things many non-executives discover is the all-consuming attitude within the company towards the bottom line. I am the first to advocate to all my clients that they pay careful and unremitting attention to margins, but, equally as important as profit is an adequate cashflow. In fact, profits are more difficult to attain without a steady flow of funds.

Because many non-executive directors have a solid financial background they will spot occasions when the team of directors has 'taken its eye off the ball' and allowed cashflow to slip.

A substantial proportion of our new business comes about after non-executive directors have suggested a review of all possible financial solutions and invoice finance has been identified as the most appropriate. They appreciate that factoring and invoice discounting presents ideal funding solutions for most companies in most industries. (See www.closeinvoice.co.uk)

Because non-execs have the time and the resources to keep up-to-date with legislation and financial solutions, as well as exchanging information and ideas with others, they are perfectly placed to plan the future shape of most organisations. Such balanced and informed input is bound to improve the performance of a board and will often lead to a realisation of the benefits of previously unthought of practices, including the use of invoice finance.


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