Downing and the Quoted Companies Alliance (QCA) commissioned Henley Business School to look at the role that non-executive directors (NEDs) play in growth companies. This research is relevant to growth companies on the Main Market of the London Stock Exchange, AIM, NEX Exchange, and companies considering an initial public offering (IPO).
The research highlights a stark difference between small and large companies and how the role, and skills required, of NEDs in growth companies vary greatly. Size, complexity, type of ownership and stage of development all have an influence over the type of Chair and NED that can add value.
NEDs need to challenge themselves regularly to ensure that they are the right person for the role they are in and, if so, to understand how they can deliver for their company. They also need to be confident that they have the skills and experience to actively support the company as it transitions to a new stage.
Similarly, Chairs should assess regularly whether they have the right people on their board for the company’s size and stage of development. Just as importantly they should also be looking to the future to ensure that the current mix of talents is relevant for the next stage of their company’s growth. They should be mindful of whether they, too, remain relevant to the company’s growth path.
Based on the findings of this study, there are a number of important questions that NEDs and Chairs should ask of themselves to ensure they are performing in their roles, both now and prospectively.
This research highlights three key aspects of the NED role in and contribution to growth companies. First, while the Chair is central in creating the necessary conditions for NED effectiveness through the implementation of sound governance practice, it is the individual NED experience, skill and will that remains the decisive factor.
Second, while there is wide variation in how a NED role can be carried out, four basic company types can be identified, each implying a particular approach by NEDs and requiring specific experience, skills and behaviour, and also a specific approach by the Chair.
Third, while all NEDs are tasked with some form of monitoring, in growth companies this is achieved through engaged stewardship.
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