Non-executive directors

Increasing levels of boardroom regulation and risk have placed greater demands on the non-executive director (NED) community.

'The days of turning up for a quick hour and a good lunch are long gone,' according to Sir Bryan Nicholson, former chairman of the Financial Reporting Council, in a PwC interview.

As the role and responsibilities of the NED widens, the decision to embark on a fresh directorship must be made with a thorough understanding of the challenges and changes facing an NED.

Key issues

The pressures of today's business environment, in conjunction with recent high-profile governance failures, are driving corporate demand for more diverse and specialised NEDs as businesses appreciate the benefits of having the right people on their boards.

Expectations of NEDs are changing rapidly, and their role is under more scrutiny than ever before. For this reason, at PricewaterhouseCoopers, we believe that it is important for potential and existing NEDs to ask key questions of themselves and of the company in question before embarking on this increasingly challenging boardroom role.

To facilitate the decision-making process, PwC's governance specialists have developed The Test, a due diligence tool designed to help potential or existing NEDs through the process of assessing whether or not to accept a non-executive directorship. The Test will assist users with a systematic consideration of the risks and benefits of taking on a new non-executive appointment.

Before accepting an appointment a prospective NED should undertake their own thorough examination of the company to satisfy themselves that it is an organisation in which they can have faith and in which they will be well suited to working.

The Test, will assist NEDs in finding answers to the following key questions:

  • Do I have something to contribute to this board?
  • Am I capable of passing judgement on the company's management/strategic plan/ risks/ alternatives/ competition?
  • Do I have sufficient time and am I sufficiently committed?
  • Am I aware of the risks?

To find out more about The Test contact Liz Smith on 020 780 45314 or Patrick Figgis, Chairman on the Non-Executive Director Development Programme on 020 780 44310.

What makes a good NED?

A good NED should bring innovation and experience to the board whilst monitoring executive decisions. The challenge is to remain independent of the business and its day-to-day operations, while maintaining a level of knowledge that will allow the NED to ask tough, objective questions.

An NED's main responsibilities include:

  • Constructively challenging and contributing to the development of strategy
  • Monitoring the performance of management
  • Satisfying themselves that financial information is accurate and that financial controls and systems of risk management are robust
  • Succession planning and determining appropriate levels of remuneration for executive directors.

At PricewaterhouseCoopers we have a long history of working with NED communities from both the private and public sector. We offer a range of services aimed at supporting NEDs in their various board and committee roles, including:

  • The Non-Executive Director Briefing Programme: which hosts quarterly briefings on topical issues facing the NED community. The programme also hosts twice-yearly workshops structured around the various board committees
  • The Test: a due diligence process to assist NEDs in deciding whether to accept a particular position
  • Boardroom development tools and best practice guidance
  • NED-specific publications and analysis
  • A workshop for aspiring NEDs in conjunction with Cass Business School
  • Corporate governance experts available to offer personal support to NEDs on specific issues.