To be or not to be a non-executive director
You are a professionally qualified accountant, recently retired from your position as the financial director of Company A, which is a listed company. Company A operates in the heavy engineering industry and you worked there for over 12 years. Prior to this, you had spent 10 years as an audit partner in a large accountancy firm.
You receive a phone call from a head-hunter with an executive recruitment agency, acting on behalf of a company’s nominations committee. After the usual small talk, he cuts to the chase:
“You have been recommended to me as a suitable candidate for a very prominent nonexecutive role that is available at the moment. The company, Company B, is a listed company, seeking a non-executive director who will also serve as the chair of the company’s audit committee.” He adds that Company B is a well-known financial services company.
You are not struggling financially. You have a reasonable pension, but the extra cash from this role would come in handy. Additionally, you are finding it difficult to fully unwind after years spent working to tight deadlines and coping with difficult challenges on a daily basis. Therefore, you find this potential opportunity very attractive. You advise the head-hunter that you will think about his proposal and get back to him as to whether you wish to be considered for the role. You hang up and then consider the matter in greater detail. Your first instinct was to say to him, whilst he was on the phone, that you wished to be considered for the position. However, due to your prudent nature, you decided that it would be wise to give yourself some time to reflect fully on the issues before making a decision.
You are keen to be put forward for this role, but you have a nagging doubt at the back of your mind: you have no work experience in the financial services sector. Twelve months ago your doubts may not have been so acute, but recent well-publicised events have certainly raised your awareness of the complexities of the transactions which many financial services companies undertake. You are caught between two stools: on one hand, there is little doubt that your business acumen will be of benefit to Company B; on the other hand, you feel that your lack of expertise in this sector will leave you struggling to contribute constructively at times.
Key fundamental principles
Integrity: You should safeguard your integrity by only allowing your name to be put forward for positions where you believe that you have (or can readily attain) the technical skill set required, or where you can serve effectively as a lay member of the board, and the board is balanced by the presence of other technical experts.
Objectivity: The ability to make an informed, unbiased decision must be preserved. The potential financial rewards are obviously a threat to your objectivity, but ultimately you should not let these cloud your judgement in considering the interests of shareholders and other stakeholders.
CCAB Ltd Registered office at above address. Registered in England No.1839569. Professional competence and due care: Can you quickly acquire adequate knowledge of the commercial, strategic, technical and regulatory requirements of the proposed role?
Identify relevant facts:
Consider the technical and regulatory requirements which impact on Company B’s business and the legal responsibilities of a non-executive director. You have to be satisfied that you can acquaint yourself with these requirements quickly. Find out whether Company B provides a comprehensive induction programme for its new nonexecutive directors, as this might help to alleviate your concerns. It would be helpful to find out whether a more detailed specification is available for the role.
Identify affected parties:
Key affected parties are you, the head-hunter, the nominations committee, other directors of Company B, and the shareholders of Company B.
Who should be involved in the resolution:
You should involve the head-hunter in the resolution process, as he may have access to much of the information you require. The nominations committee may also be involved through their contact with him.
If you do decide to be put forward for the role, then you should be open and transparent in your discussions with Company B. The nominations committee may, in fact, be looking for someone who is unfamiliar with the financial services industry, or who has the specific qualities that you possess, in order to bring a fresh perspective to the workings of the company’s board and audit committee.
Possible course of action
Ultimately, you have to exercise professional judgement in this matter. If you do not feel comfortable being put forward for the role, then you should inform the head-hunter accordingly. You may, of course, decide to be put forward for the role, but if your concerns are not adequately addressed, and if you are offered the role, you should decline the appointment at that stage. You should also consider contacting your professional body for advice.
You need to establish what Company B is looking for. Try to obtain a detailed specification of the role and the skill set of the person that the company requires. Ask the head-hunter why, in his opinion, you were “recommended” to him as a suitable candidate. You need to ensure that you are aware of the responsibilities associated with a non-executive director’s role. You should also undertake your own due diligence on Company B and on your prospective fellow directors. Do you believe that, even if you have, or can acquire, the necessary skill set, this is a company on whose board you would want to serve? Do you believe that the board would then have the correct composition and balance?