Tesse Akpeki outlines the latest guidance for non-executive directors.
In the past few years I have been coming across more organisations which are companies as well as charities, or companies limited by guarantee or shares, or registered as Community Interest Companies.
The directors often share their concern about liability and risk. With the new year, it is encouraging to see the latest guidance note from the Institute of Chartered Secretaries and Administrators (ICSA) that outlines appropriate steps that non-executive directors (NEDs) can take to show care, skill and diligence in the execution of their roles and responsibilities.
On offer are ways in which NEDs can approach their work which would also allow them to demonstrate to a regulator, or in a court of law, that they had executed all necessary practices to reduce their liability exposure. Its practical guidance can steer directors away from trouble and help to avoid lasting damage to their company or themselves.
The time commitment necessary to fulfil the expectations of the role may be significant, and possibly greater than has previously been expected. While the role can confer influence, status and power, it carries great responsibilities. The guidance note, entitled ICSA guidance on liability of NEDs: care, skill and diligence, advises NEDs on what due diligence should be undertaken before joining a board and on appointment to a board.
Emphasis is placed on the skills needed to serve on a particular board, which would provide a NED with ‘independence, oversight and the confidence to constructively challenge a board’.
Areas of best practice for NEDs outlined in this guidance note include:
- Taking responsibility for their own ongoing training and continuous development;
- Being prepared to provide independent oversight and constructive challenge;
- Insisting on receiving high-quality information;
- Making decisions objectively in the interests in the company, and
- Avoiding conflicts of interest.
A last word to those NEDs: be alert, not alarmed!
