By David Selves, Broadcaster and Business Advisor at The Selves Group
Authorised Fund Managers (AFMs) across the UK are scrambling to fill up to 480 independent non-executive director vacancies to comply with new legislation released by the Financial Conduct Authority (FCA).
As part of the legislation, the FCA requires that all AFMs must have a minimum of two independent directors on their board by Monday 30th September 2019. So, with just three months until the deadline, AFMs are actively looking for suitable professionals to fill this gap, but who are the desired candidates and what skills do they need to possess?
Essentially, the primary role of a non-executive director (NED) is to impart a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors. Assigned to question the status quo of an organisation, NEDs typically do not engage in the day-to-day management, but are involved in policymaking and planning exercises.
Ideally, NEDs should not be from the industry in question, thereby enforcing impartiality in the best interests of the company stakeholders. In addition, they should either be worldly – which may mean simply having a vast experience of life in general across numerous disciplines, rather than senior roles in another industry – or be what is referred to as an ‘expert customer’; a person who potentially might use the product or service offered.
Regardless of industry experience, NEDs must be independent thinkers and question strategy, management techniques, performance and standards of ethics and conduct. Predominantly, they should always take an independent view on the promotion and external appointments of senior executives.
NEDs also need to understand the workings of the company before they accept a position because they will have exactly the same responsibilities in law as executive directors. Whilst they should be given sufficient industry training to be able to effectively challenge the executive directors, they must also ensure that they have the time to keep up to date with ever-changing industry standards.
For progressive businesses, the value of a NED is that they bring a broader perspective. Companies often appoint NEDs for their contacts, particularly in the bigger cities, but that can be a dangerous route. The idea of a NED is not to facilitate wheels within wheels, but in fact quite the opposite. A NED should act as a centre of influence to ensure the company contacts the right external groups. Moreover, smaller companies are increasingly finding that the relatively low cost of NEDs is a very worthwhile investment.
In short, NEDs need to bring a host of skills to the table. AFMs want someone who has a wide experience of life, is independent of thought and deed, acts impartially, and is a well-rounded and respected individual. While on the job, the ideal NED should provide constructive challenge both strategically and operationally, offer specialist advice where qualified to do so, and never be afraid to hold management to account.
David Selves is a business advisor at The Selves Group. He has enjoyed an eventful 50-year career as a seasoned broadcaster, entrepreneur, publican and hotelier. Making his name in business hospitality by purchasing struggling hotels and turning them into award-winning venues, David has built a reputation as a respected and highly regarded businessman. He was also the former Regional Chairman and National Board Member of the Small Business