Ideal Skillset for a Non-Executive: FT Q&A

The following question was published in the Financial Times on 30th April and answered by Melanie Wadsworth, a partner in the London office of Faegre & Benson LLP.

We are considering appointing a non-executive director for the first time to advise us on our growth and exit strategy.  What sort of skillset should we be looking for and what are the legal considerations.

It will be important to find a non-executive director (NED) who understands your business and has relevant expertise, but who can also bring wider experience to bear.

Given that developing an exit strategy is a priority, finding an NED who has taken a company through a trade sale, IPO or other similar milestone would be of benefit.  A key part of the NED's role is to challenge the thinking of the executive directors and, as a joint owner, you should be prepared for that.

It will be easier for you to accept constructive criticism or new ideas from someone you like and respect, so don't underestimate the importance of personal chemistry.

Make sure that the new director is given timely access to all the information needed to do the job properly and ensure regular dialogue.  And don't wait for a formal board meeting to seek your NED's input.  The terms of appointment of your NED should be in writing and address issues such as confidentiality and conflicts of interest.  Some NEDs hold multiple positions and you should be clear as to the time commitment you expect and how potential conflicts will be handled.

There is no distinction in English law between the responsibilities of an NED and an executive director and no NED should take on the role lightly.

Beware any NED who juggles a large portfolio with little apparent knowledge of the underlying businesses.  Such a person is unlikely to discharge their duties properly and will not add value to your board.