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When it comes to corporate governance, the understanding of this complex field is crucial to maintain a successful business within the new digital age. The International Leadership Development Programme takes participants on a deep dive into this critical subject, including the issues on executive and non-executive directors. In this article, we discuss the latter, and extrapolate the oftentimes difficult position of the non-executive director.
We all feel for non-executive directors, be they lead, independent; or listed or non-listed – they face a raft of challenges. These challenges fall awkwardly under a barrage of different headings: regulation, ethics, environment, law, competition, compliance, social investment, commercial sustainability, etc., the list goes on.
Most non-executives come with formidable skills-sets: they know the law, they can mine financial statements, they understand IT, they interpret the implications of risk, and they are masters of strategy. They mostly do an excellent job. However, many non-executive directors function within an internal perspective.
But, there is one area that causes broken sleep among non-executive directors. And that is how to manage the seemingly unpredictable actions of the people “out there”. These are the dreaded stakeholders, the organisations and agencies that seem to work in unpredictable ways and get riled up about the most innocuous things. The rest of the world is coming into the boardroom, and non-executive directors are having to learn new ways of dealing with this.
Some non-executive directors avoid becoming involved. “Oh, that’s a management responsibility; I don’t concern myself with that sort of thing.” This internally focused attitude removes directors from the real world.
The boundaries and barriers between the boardroom and the rest of the world are breaking down, much like the Berlin Wall in the late 80s. Organisations are now accountable to stakeholders, whether they like it or not. In 1970, the economist Milton Friedman famously stated that:
“The business of business is business.”
Explicit within this well-known quotation is the notion that an ethical business need only make profits and obey the laws of the land. No other effort was required of a business in order to fulfil its real and perceived obligations.
Stakeholders increasingly insist that organisations, both public and private, produce goods and services complying with international expectations and standards regarding human rights and environmental and climate protection. It is not enough for managers to run organisations efficiently. They must do good as well. Grayson and Hodges came up with a rephrasing:
“Today the business of business is everybody’s business.”
This frames the challenge for non-executive directors: they have to manage the opportunities and material risks outside the financial and operational features of the business in order to ensure the long-term viability of the company.
Non-executive directors are distant from the daily affairs of the company. They are therefore more vulnerable to unintended stakeholder risk. They have to demonstrate ethical leadership while defending the interests of the organisation.
Stakeholder engagement is here to stay. It is the responsibility of the board, particularly the non-executive directors, to prioritise stakeholder risks and opportunities. Non-executive directors should ensure that management comprehends the importance of a changing world where stakeholders are becoming more and more critical. They are compelled to insist on sound stakeholder and issue analyses, combined with effective engagement strategies underpinned by good metrics and budgets to ensure sustainability.
Now is the time for non-executive directors to show their strength.
The International Leadership Development Programme (ILDP) from Regenesys Business School comprises of a world-class, innovative and disruptive curriculum that develops leadership competencies for the new digital world, with a strong focus on issues of corporate governance, such as the roles of directors, both executive and non-executive.
The intense programme explores cutting-edge knowledge, global trends and best practice in digital transformation, entrepreneurship, strategy, and innovation from the fastest-growing companies in the USA.
Participants are exposed to applied learning using innovative learning techniques, master classes, exposure to giants of industry, focused networking opportunities and commercial
matching to sector-level opportunities. The programme is facilitated by global faculty comprising experts in specialised fields as well as top business leaders.
