Who would want to be a NED?
February 16, 2022
This was the subject of a webinar held on 9 February produced through the good offices of the London Stock Exchange Group. A panel of experts representing MM&K, search firm First Flight, Women on Boards and Board Excellence, a specialist in Board Evaluation, considered the question in light of findings in MM&K’s survey of Chairs and NEDs, “Life in the Boardroom”.
We keep a finger on the NED pulse through “Life in the Boardroom” which, in its latest iteration, includes responses from 358 directors, representing 885 roles, of which 331 were Chairs. It is unique insofar as, in addition to data on fees and time commitments, the survey report includes insights and comments from NEDs on subjects which are of most interest or concern to them.
A summary of key findings from the Life in the Boardroom 2021/22 report set the ball rolling for the panel to offer their thoughts on the core question and their responses to questions from the moderator and audience members. A review of the webinar can be found here and a recording is available here.
The remainder of this article summarises some of the key survey findings, which sparked the question: who would want to be a NED?
It will be interesting to see how this might change as the corporate landscape changes in future with the growth in early-stage, technology-based companies and as the NED role continues to evolve. Experience is a key quality NEDs bring to the boardroom. On the other hand, there is a case for introducing new blood with new ideas to promote change.
2. Board composition and diversity:
These results may raise questions about whether a board with those levels of female representation can be regarded as diverse and fully effective. But there are also important questions about why so few females ascend to become board Chairs, raising questions about corporate culture.
Policies for bringing on talent and management succession planning are important for ensuring there is a pipeline of talent moving through the business to provide future generations of executive and non-executive directors.
3. Appointment process:
4. Time commitments and fees:
Many respondents attribute greater demands to increased regulation and time spent in Board meetings, which leaves less time for their other activities.
Comments received from survey participants indicate a concern about the balance of risk and reward for NEDs as their roles evolve. A potential risk for business is that if developing talent is deterred from taking up NED appointments, the quality of boards may start to decline.
5. Board development/evaluation
The level of annual evaluations is encouraging but there is an implication in these findings that about half of Boards mark their own homework as regards board evaluation – a possible indicating that a cultural shift is needed to attract new talent, bring about change, where that is necessary and maintain high levels of board quality.
Our experience is that, during the pandemic, NEDs have spent more time supporting executive management to make strategic business decisions in light of the effect of COVID on their businesses. However, survey participants cited regulation and compliance as principal reasons for greater demands on their role.
Participants’ comments indicate that NEDs, who are working mothers, value the flexibility of home working but are fearful that as COVID diminishes, practices will revert to pre-pandemic norms making it more difficult for them to become and perform effectively as NEDs.
It is clear, if proof were needed, that the NED role is evolving and is becoming more demanding.
This may be partly due to the pandemic. But there is growing concern about the impact of regulation and the balance of risk and reward.
A real challenge for companies is to attract and retain individuals from as wide a talent pool as possible to maintain and develop the quality of their Boards.
We are grateful to the London Stock Exchange Group, to the webinar panel and to all those who registered to watch “live” or receive a recording. Life in the Boardroom participants receive a complimentary copy of the report and non-participants can purchase a copy and sign-up to receive MM&K newsletters and details of future events by contacting us.
Find out more about Life in the Boardroom here.
Download a preview of the report here.