THE ROLES AND RESPONSIBILITIES OF A NON-EXECUTIVE DIRECTOR
Michael Tait, independent chairman and non-executive director, explains the key roles and responsibilities of a non executive director.
A Non-Executive Director (NED) is a member of a company’s board of directors who is not involved in the day-to-day management of the company. Non-Executive Directors play a crucial role in the governance and oversight of a company, and they are responsible for providing independent and objective advice to the executive management team and the board of directors. In the United Kingdom, the role of Non-Executive Directors is regulated by the Companies Act 2006, which outlines their responsibilities and obligations.
Roles and Responsibilities of a UK Non-Executive Director:
1. Strategic Oversight: Non-Executive Directors are responsible for providing strategic oversight of the company, ensuring that the board of directors as a whole is fully informed about the company’s performance and plans for the future. They are also responsible for ensuring that the company is complying with all relevant laws and regulations, and that it is operating in an ethical and responsible manner.
2. Board Effectiveness: Non-Executive Directors are responsible for contributing to the effectiveness of the board of directors, and they are expected to provide independent and objective advice to the board. They are also responsible for ensuring that the board is operating effectively and efficiently, and that it is providing the right level of challenge and support to the executive management team.
3. Corporate Governance: Non-Executive Directors are responsible for ensuring that the company has effective systems and processes in place for corporate governance, and that it is complying with all relevant laws and regulations. They are also responsible for ensuring that the company is transparent and accountable in its dealings with stakeholders, including shareholders, employees, and customers.
4. Risk Management: Non-Executive Directors are responsible for ensuring that the company has effective systems and processes in place for managing risk, and that it is assessing and managing risks appropriately. They are also responsible for ensuring that the board is fully informed about the company’s risk profile and that it is taking appropriate action to manage risks.
5. Performance Monitoring: Non-Executive Directors are responsible for monitoring the performance of the company, and they are expected to ensure that the board is fully informed about the company’s performance. They are also responsible for ensuring that the company is using its resources effectively, and that it is delivering on its objectives and plans for the future.
6. Stakeholder Engagement: Non-Executive Directors are responsible for engaging with stakeholders, including shareholders, employees, and customers, to ensure that the company is responsive to their needs and expectations. They are also responsible for ensuring that the board is fully informed about the views of stakeholders, and that it is taking these views into account in its decision-making.
In conclusion, the role of a Non-Executive Director in the United Kingdom is crucial to the governance and oversight of a company. They are responsible for providing strategic oversight, contributing to the effectiveness of the board, ensuring compliance with corporate governance requirements, managing risk, monitoring performance, and engaging with stakeholders. Non-Executive Directors play an important role in ensuring that companies are operating effectively and efficiently, and that they are delivering on their obligations to stakeholders.
Useful readings about the role and responsibilities of a non-executive director:
https://www.cipd.co.uk/knowledge/strategy/governance/non-executive-directors-factsheet#gref
https://en.wikipedia.org/wiki/Non-executive_director
https://corporatefinanceinstitute.com/resources/esg/non-executive-director/
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