The Role of Non-executive Board Directors Today

As a non-executive board director, I have been thinking a lot lately about what it means to do this role in today’s environment. With a dramatically different economic climate in which organisations are now operating, as well as increased scrutiny by stakeholders and governments alike, the nature of what it takes to be a responsible board member, too, has changed. Simply looking over the shoulder of the executive team and offering an occasional word of wisdom or direction is not sufficient. Non-executive board directors today need to be activist in their approach to ensuring that the organisations they serve do not simply survive but thrive, even in economically difficult conditions. The boards on which they serve should demand no less of them than that.

The best organisations of all sizes, in the for-profit and not-for profit sectors alike, are looking for active, engaged, independent, and interested board members and they encourage a climate in which having those people on the board can bear fruit. These board rooms are environments in which board members are comfortable, and indeed required, to ask hard questions, challenge the status quo, and step up to assist in areas where they can. An independent board director should bring independence in word and deed and a fresh perspective to the organisation.

How does this manifest itself in practice?

Understanding relationships and roles of the stakeholders is vital. Non-executive directors need to be able to distinguish between different types of relationship within and without the organisation, as well as see the connections between them: relationships between the board and the senior executive team, the organisation’s staff, and investors; relationships with the organisation’s customers and the market in which it operates, including partners and competitors; and fellow board members.

How does this translate into an activist approach?

Activist board directors engage and reach out. They ask questions inside and outside the organisation and seek advice from fellow board members, senior executives, staff and investors and thus gain a fuller understanding of the challenges their organisation confronts, as well as the resources and capabilities it has (and needs) to master them. In my experience, this implies a number of different strategies.

First, and especially at the point when joining as a new director, I have found it incredibly useful to reach out to existing directors and get to know them beyond their bios and outside of the structured board setting. Getting to know my fellow executive and non-executive board directors and understanding what their passion for the organisation is and where it comes from, how and why they have made the organisation part of themselves, helps to build board cohesion and can make a big difference in avoiding confusion in the heat of the board room. Boards function better when the people around the table know and trust one another and feel that they are moving in the same direction.

Second, this focus on people does not stop at the board level. It is essential that today’s board directors engage much more broadly. Being approachable and reaching out to people, they are able to talk with, and especially to listen to, senior managers, staff, and investors, understand and respect their views, and help harnessing their passion and commitment to the organisation, thus ensuring its endurance and robustness. Hearing the voices from the organisation directly means non-executives board members can form their own ideas and perspectives on the information they are receiving in board papers and reports.

Third, people focus, as important as it is, is not all that distinguishes activist directors. Understanding the nuts and bolts of the business also means, and indeed requires, asking the hard questions. It also means not being satisfied with simply asking the questions, but doing something with the answers. An independent perspective here means being sensitive to internal factors that shape the organisation’s capacity to survive and thrive as it confronts current challenges and those that will surely arise in the future. I have a special interest in finance and the audit committee, so for me that means being comfortable asking hard questions about the numbers, past, present, and future.

Fourth, though the nuts and bolts of the organisation are internal, they do not exist in isolation from the outside world. Non-executive board directors need to keep an eye on the global factors that shape the broader environment in which their organisation operates—from government regulation to customer expectations and to a constantly changing competitive landscape. This outside independent perspective is indeed one of the greatest values board members can bring to the table. Keeping on top of these developments is not always easy, but it is necessary, and, in our electronically and humanly networked world, possible. Again, one element is to proactively seek knowledge, the other, and equally important one, is to do something with it: to seek and see opportunities for the organisation to shape the environment in which it operates.

To bring things back to the board room, sensitivity to local and global issues, internal and external matters, and understanding the human and material assets of the organisation are core aspects of the activist approach. Yet, they can only be useful if non-executive board directors are also part of creating a safe environment for open, critical, constructive conversation to move the organisation to the next level.

Because today’s healthy board rooms are becoming places of active and rigorous discussion, non-executive directors must also contribute to sustaining a constructive environment by avoiding abusing the space it creates. I’ve been lucky to be in board rooms with some directors who have mastered the art of communicating effectively in the board room setting: not holding back opinions if something is obviously wrong, but also waiting for the right time to say things. And not just say things in ways that are comfortable for themselves, but say them in ways they will be heard and listened to. Above all, they do not just say things for their own sake, but because they are important and add value to a discussion that is focused on benefitting the organisation and not the individual that says something.

In a nut shell, as an active, engaged, and accountable non-executive board member in today’s board room, I constantly strive to have the best possible understanding of the business the organisation is in and the one it wants to be in, and what the organisation is and what it wants to be. On that basis I can help devise feasible and viable strategies to get from one to the other and contribute to guiding the organisations on whose boards I sit into a successful and sustainable future – and do the job I have been hired to do.

Lucy P. Marcus is the non-executive chair of the Mobius Life Sciences Fund, non-executive director and chair of the board audit committee of BioCity Nottingham, CEO of Marcus Venture Consulting, and a Fellow at University of Cambridge’s Judge Business School. She can be found on Twitter via @lucymarcus

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Date

9 August 2010

Compliance Week interviewed Lucy for their weekly corporate governance podcast. The interview covers a wide range of topics around the role of active and engaged non-executive board directors in an increasingly complex global business environment.

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