What is a non-executive director?

The average salary for a non-executive director in the UK ranges from approximately £15K up to £90K, which is a pretty wide range – suggesting a large variability in the benefits, functions, and responsibilities of non-executive directors. So, what are they, what do they do, and what are they responsible for? 

What is a non-executive director? 

A non-executive director is a person who forms part of your board of directors. They are not part of your executive team and they do not function as a member of your employee pool – so they don’t fill the role of Chief Marketing Officer, Business Development Executive, or even CEO. Instead, they serve as an advisor to the board and they look after the interests of the business. 

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What does a non-executive director do? 

They’re involved in top level activities, such as strategy planning, high level decision making, and performance analysis. You might be wondering why you would need someone distanced from the day-to-day activities of the business or the managerial roles of the business to look after the business’ interests, after all, isn’t that what the C-Suite is for? Well, a non-executive director can provide a more impartial perspective. Here’s what that might look like. 

Example: Let’s say, for instance, the marketing department is doing a very poor job. It’s possible that the executive directors may be very attached to the marketing team, as they are directly involved in managing and working with them. A non-executive director, on the other hand, might be able to provide a fresh, less partial perspective, which could be essential to understanding why the team is performing poorly and what can be done to improve the department and overall growth of the business. 

For instance, the answer that would work best for the business could be to hire an external resource who will serve as director over the entire department, and that person would be given final say on any marketing activities. This would involve hiring an external resource to fill a role that internal resources may have been hoping for, potentially creating conflict and requiring careful management to prevent an impact to morale. This is a possible example of a decision a non-executive director could be invaluable in facilitating. 

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What is a non-executive director responsible for? 

They are usually responsible for mentoring, policy making, governance, representing shareholder interests, overseeing the board, risk assessment, strategy, and appointing executives. 

Common misconceptions about the role of a non-executive director 

There are some common misconceptions about non-executive directors, here are a few of them.  

They’re only helpful to large companies 

Non-executive directors are a staple of large businesses, but that doesn't mean they aren’t a valuable asset for small and medium sized companies too. Non-executive directors are often very experienced leaders – people who might otherwise have cost hundreds of thousands of pounds to onboard as a full-time resource. 

By onboarding a very experienced non-executive director, small to medium businesses can benefit from decades of experience, a deep network of industry peers, and a strong awareness of common pitfalls (which they may have seen at other businesses they’ve worked with), often for a reduced cost when compared to hiring a full time executive at a similar level of experience. 

Non-executive directors aren’t helpful 

By providing an impartial perspective, decades of industry experience, and a firm hand in decision making, non-executive directors can prove themselves to be a highly valuable resource to businesses of all sizes. 

They’re just figureheads 

Since non-executive directors don’t play a role in the day-to-day management or execution of the business, some business owners or employees can begin to see non-executive directors as “just figureheads.” This is inaccurate. By providing essential guidance, mentorship, and decision making support to company leaders, non-executive directors play a pivotal role in furthering the businesses objectives and ensuring it meets its goals. 

They can’t add to revenue 

Many non-executive directors come with deep industry connections – a wide ranging network that has been built up over the decades. Depending on the executive you hire, it’s possible that by onboarding them to your business, you give them a reason to be invested in your success, opening yourself up to a potential organic introduction to a large pool of industry leaders. 

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Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

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