What do CEOs seek in NEDs?

As business leaders, you’re in a position to take a more informed view, but given the number of well-documented failures of effective governance in recent years, it’s unsurprising that the role and responsibilities of NEDs has moved centre stage.

We’ve just completed a series of interviews with CEOs from some of the UK’s major companies to find out how much they value NEDs’ input. The CEOs were generally positive. Unsurprisingly, there was a preference for ‘working’ non-execs: people with key skills or sector knowledge who are holding down senior executive jobs elsewhere. Today’s CEO has little time for the old-school, generalist ‘grandee’ NED – with or without a title!

But there were also areas of concern. Some CEOs feel that NEDs’ increasing attention to the requirements of compliance and the avoidance of risk can hinder growth. The consensus was that the balance between the conflicting need for risk management and risk taking – the lifeblood of all successful businesses – had swung too far towards the former.

Some CEOs noted that compliance issues often dominated proceedings at formal board meetings, reducing the time spent on substantive discussions around fulfilling the business’s potential. Moreover, CEOs noted that NEDs have a tendency to use compliance as a personal safety net rather than as a means of maintaining good governance. In short, CEOs felt that if NEDs’ concern principally was for their own self-preservation, they were failing in their duty to protect the interests of share-holders.

So from the perspective of the CEO – concerned, as our research suggests, that boards should be engines for growth not just compliance – what should a model board look like? What’s the ideal mix of skills and behaviours? What are the different types of personalities that, collectively, make the boardroom a more stimulating and effective environment?

We’ve come up with nine character types. Yes, there was quite a bit of discussion and disagreement about these amongst the Merryck faculty and they are by no means presented as an exhaustive or essential list. Just regard it as a consensus view based on our direct experience of working with corporate boards and listening to CEOs’ concerns:

The diver

The (sometimes irritating) individual who looks for evidence to support the argument.

The naysayer 

If there’s an omission that invalidates a carefully constructed argument, this board member will find it.

The dreamer 

Boards can’t be in thrall to legal and financial issues: they have to be creative. The capacity to envision the future – without necessarily understanding how to get there – should be integral to board activity.

The operator 

The person who knows the ins and outs of operating a business (but not necessarily this business).

The poker player 

You’ll always need an adept negotiator.

The nomad 

A culturally aware traveller with the insight and instinct to know exactly what the company should be concentrating on at a particular time.

The disciplinarian 

Someone who ‘owns’ the salient points in discussions: an individual who’s concerned about process and compliance as much as results. 

The harmoniser 

The individual who can smooth damaged egos and forge long-term relationships conducive to good decision-making.

The manipulator 

This is an ideal characteristic for company secretaries; the person with the ability to ensure that the process and the people are in harmony with regard to a desired conclusion.

There can be no fixed template for a board and the make-up of each will depend on factors such as the specific business context, the demands of the shareholders and the regulatory requirements of the industry. We were pleased to hear that on the whole boards are working well, but the improving economic environment demands a new mind-set with regard to business investment, collaborative working and innovation to which boards need to respond.

Dennis Kerslake is a mentor at Merryck & Co.

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