Being a non-executive director

[TUS 373]

Just finished my MBA and a local company (an SME) has been talking about offering me a non-executive directorship of their company starting in November.

I have not been a director before, and wonder if anyone can give me an idea of how many days a month non-execs work, what kind of rates of pay can be expected, what is the normal duration of such a position on a company's board. No doubt there will be differences between companies, but I am very interested to learn more about these kinds of positions and the practicalities of performing one's duties.

[davidd]

TUS 373 said:

Just finished my MBA and a local company (an SME) has been talking about offering me a non-executive directorship of their company starting in November. I have not been a director before, and wonder if anyone can give me an idea of how many days a month non-execs work, what kind of rates of pay can be expected, what is the normal duration of such a position on a company's board. No doubt there will be differences between companies, but I am very interested to learn more about these kinds of positions and the practicalities of performing one's duties.

As I've always understood it the role of a none exec is that you act as an advisor and sounding board to the board of directors.

The amount of time you spend on it depends on what they want and what you want to get out of it.

As for pay, I believe in a lot of cases a non exec role is not usually paid much if anything. A lot of people do it for their egos or to further their experience (I'm sure you fall into the latter). It can be a good way of getting good board level experience with little risk!

D

[Eric Mc]

Non- executive directors are usually appointed as an "over see-er" who monitors what the board of directors (the executive directors) are up to. They are fairly rare in non-PLC companies as in most SME operations the directors and shareholders are often one and the same people. The positions tend to be given to individuals who have experience of the business the company is involved in or may even be retired former members of the board but who no longer have a vested interest in the company (apart from their salary, of course).

Rates of pay and hours involved would vary hugely, comsnsurate, no doubt, with the size and complexity of the business - and/or the level of shareholder or bank interest in the day to day running of the enterprise.

[Size Nine Elm]

Note that there is no legal differentiation between a non-exec and an exec, so you are a full director of the company.

Remuneration is whatever you agree. Personally not been paid as a non-exec, but as a shareholder I was looking after an investment.

Also depends what the execs want to get from you - key role for non-execs is corporate governance, making sure the board do the right thing legally, and in the interests of the shareholders.

Time required - depends. Small, fast moving companies may want a board meeting once a month, larger companies may have less frequent, but with more to review beforehand.

YMMV...

[TDTH1975]

If I understand correctly, En exec/non exec as previously stated is basically the same thing. as far as hours in the office go - i seem to recall that there is a requirement that you must spend at least one day of every calendar month in the office.

[Size Nine Elm]

Eric Mc said:

They are fairly rare in non-PLC companies

Not in any company with VC capital, there is almost always an NXD appointed.

ALso in companies with any significant angel investment, theer should be an independent director to look after the interests of the investors who are not involved directly with the company.

[TUS 373]

Yes, that is exactly the position with this company. It has both VC and angel funding to progess a technological development into a concept that may be licensed to other companies. They have asked me to join them because I have a background that it particulalry useful to them.

Only thing is, I need a full-time permament position along the lines of Commercial Director. If I accept this non-exec post, then I will have to negotiate with another potential employer to get the time off at company B to spend at company A. As I have no experience of this kind of scenario previously, it would be nice to know how to go about putting this altogether if the money/time/travel/experience is right.

Thanks for the replies so far, its all very interesting for me.

[NikB]

TUS 373 said:

Just finished my MBA

Hi,

Sorry I can't answer your question, but I am interested in an MBA. Did you study yours full or part time? How much work was it? Has it opened more doors for you?

I am from an engineering background looking to move up the chain into management, would an MBA be the way forward for me (I already have a degree and an MSc).

Cheers

Nik

[Size Nine Elm]

TUS 373 said:

Yes, that is exactly the position with this company. It has both VC and angel funding to progess a technological development into a concept that may be licensed to other companies. They have asked me to join them because I have a background that it particulalry useful to them. Only thing is, I need a full-time permament position along the lines of Commercial Director. If I accept this non-exec post, then I will have to negotiate with another potential employer to get the time off at company B to spend at company A. As I have no experience of this kind of scenario previously, it would be nice to know how to go about putting this altogether if the money/time/travel/experience is right. Thanks for the replies so far, its all very interesting for me.

Tricky. You may have to ask them to be 'flexible' about hours, i.e. use flexitime, or even take some holiday in that case - or be honest, and take a pro-rata salary reduction based on one day a month on other work.

Or go the whole hog and become a professional NXD, and try and acquire 4 or 5 other posts. Hard work...

[TUS 373]

NikB said:

TUS 373 said: Just finished my MBA Hi, Sorry I can't answer your question, but I am interested in an MBA. Did you study yours full or part time? How much work was it? Has it opened more doors for you? I am from an engineering background looking to move up the chain into management, would an MBA be the way forward for me (I already have a degree and an MSc). Cheers Nik

I cannot answer all your questions but...
1. full time
2. yes, very hardwork at times -at its low point I got home from Uni at 4.00am after working with a team to finish a project. Got up at 6.45am to go back and present it at 9.00am the following morning.
3. Opens doors? Well I hope so - I don't think it does any harm to have an MBA, but I would be very clear on the reasons you want to do one right from the start. There are many choices of subjects to take along the way - and that depends on what you are aiming for.

I really enjoyed the MBA, especially the project. The downside is that is hard work, time consuming and hugely expensive. My course fees alone were £16,500 for one year and there are plenty of expenses associated with the course (lap top PC, books, travel etc), the opportunity cost for not having a salary (so add that on), mortgage etc etc. So, its not a light option to take. Saying all that, I'm glad I've done it because I feel so much more knowledgable about other areas of business. FYI, I went to Bradford School of Management which is one of the top 10 UK business schools, hence the price!

[ettore]

Non-execs typically work between 2-4 days a month (although it can be as little as 1 day), primarily around corporate governance and/or sales/marketing.

I disagree with Eric - all manner of organisations have the need for non-exec`s, particularly if they have outside funding. This is true of both product and services organisations, particularly those that are new and/or growing.

Remuneration depends entirely upon any stock/options that are awarded or accumulated. The industry standard cash remuneration for non FTSE companies is between £15-£25K, although it can go much higher.

It is entirely possible to have a full time job and also hold a non-exec` position. In fact, depending on seniority it can be seen as a good thing. It does help if the companies are not competitive though! (and you must declare it at interview)

[Eric Mc]

I didn't say that non PLCs NEVER had non-exec' directors. However, given the total number of limited companies trading in the UK, only a relatively small number have such a position. I have dealt with hundreds of companies over 20 years and only a handful had non-exec' directors.

I agree entirely with the reasons they are appointed - usually at the behest of shareholders or outside investors.

[clapham993]

The thing to consider is not so much your duties as a statutory director of the SME (Although be wary of any Directors personal guarantees that they may ask you to sign) but what view any full-time employer who you later join will take of these activities. As a limited Liability Partnership, we have very strict guidelines on what non-exec directorates we are allowed to take on and what we have to do with any income that we earn.

[JohnL]

I know one non-exec very well - he gets about £35k for two days a month at a large blue-chip household-name company. Also about £12k for one-two days at a smaller, Ltd co. that's not listed.