BEFORE APPOINTING A NON-EXECUTIVE DIRECTOR

Non-Executive Directors (NEDs) play an important and indispensable role in corporate governance and commercial sustenance. Although NEDs share the same general responsibilities and duties as other Directors, they occupy a central position in Board governance and play an integral role in ensuring the effectiveness of Executive Directors and the smooth functioning of any business enterprise. Perhaps the most critical of the roles of the NEDs is defining the company’s values and standards and ensuring that its obligations to its stakeholders are accomplished. NEDs are also expected to bring significant objectivity and independence to the Boardroom.

These important and incontrovertible roles and duties of the NED require specific skills, qualities and qualification from individuals appointed to occupy such positions and elevates the need to ensure that only individuals who possess the right qualities and characteristics are so appointed. There is a consensus that several of the recent high profile corporate failures could have been averted if the NEDs on the Boards of the affected companies exercised the level of independence and objectivity naturally expected of them. Thus, it is essential that in appointing a prospective NED, care must be taken to ensure that the individual possesses not only the relevant skills set, but is of such disposition and has attained such level of preparedness that would enable an objective and effective discharge of the duties of the NED.

A Non-Executive Director should have sufficient knowledge of the Company’s industry and the ability to make meaningful impact on the Company’s business, such that could easily give confidence to both Management and investors. Furthermore, a sufficiently strong character that would enable the NED constructively question Management proposals is also critical. A prospective NED should be able to bring positive attitude to the Board by participating actively in the decision-making process and scrutinizing the actions of Management without emotional hindrance.

Independence within the context of a NED is the ability to exude objective thinking devoid of extraneous influence. It is expected that a candidate for an NED position must possess a level of independence from Management and other interests related to the company to ensure that he/she is well positioned to provide an unbiased, impartial and objective view on matters before the Board. Thus, it is important to ascertain that the director is independent in character and judgement and that there are no relationships or circumstances which are likely to affect, or could affect the director’s judgement.

It is also important before finalizing the appointment of a NED, to confirm the ability of the prospective NED to remain on the Board for a reasonable period. There is no gain saying that organizational goals and objectives can hardly be achieved where there is a high level of Director attrition. A notable lacuna in most corporate governance codes is the requirement for NEDs to commit to spending a minimum period of time on the Board.

Perhaps the most important consideration before appointing a NED is the ability of the prospective candidate to devout sufficient time to the affairs of the company. To fulfil their roles, NEDs would be required to meet from time to time and to serve on Board Committees. This comes with a demand on the NED’s time and specifically his ability to show the required level of commitment to the Company’s affairs. Thus, it is important before appointing a NED, to ascertain that the candidate can allocate appropriate time to meet the demands of the role as may be required. Beyond this, Directors should be made to disclose their other significant commitments to the Board with a broad indication of the time involved in such other responsibilities. Ensuring that a Director has enough time to carry out the responsibilities of the role should be ongoing. Thus, a NED should typically get the Board’s buy-in before accepting additional commitment that might impact on his/her time availability.

Given the significant role of the Non-Executive Director in the achievement of corporate goals, it is imperative to get it right from the beginning by ensuring that prospective candidates possess the requisite qualities to perform the role and are able to devote adequate time to providing the requisite oversight.

Ozor Chinedu

DCSL Corporate Services Limited.

+2348055402929, +2348055371550

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