Executive and Non-Executive Directors

BRIEFING NOTE

"If two people on a board always agree with each other then one is unnecessary"

J P Morgan

1.0 INTRODUCTION

Examine the legal and business reasons for having a Board.

1.1 Why do we need a board?
1.2 Who should be on a board?
1.3 How many should there be?
1.4 Frequency of board meetings?
1.5 What should be on agenda?

2.0 ROLES AND RESPONSIBILITIES

2.1 Chairman - Balance Sheet, composition, business and efficiency of board, balanced, (allows others to have their say before coming off the fence).
2.2 Managing director - P&L, delivery of strategic aims, operations efficiency
2.3 Company Secretary - legal
2.4 Board as a whole has responsibility for guiding the company, providing checks and balances, forward planning, strategy and balance decision making.
2.5 NXDs - look at major issues with objectivity and detachment, act in best interests of company, represent minority shareholders, devil's advocates, guardians of the strategic plan, pressing management to achieve objectives, dealing with senior personnel matters.

3.0 MAKE UP OF BOARD

3.1 Mix will have an impact on effectiveness
3.2 Do not want "yes" men
3.3 Board needs to challenge executive constantly
3.4 Complacency can be detrimental or even terminal

4.0 NXDs

4.1 What is purpose in having one?

• independent
• detached from business
• act for best interest of company to achieve better, more balanced decision making
• appointments and remuneration
• added skills such as business, sectoral, personal, mentoring
  to challenge executives and company performance
  

4.2 Regardless of size there is every reason for having one.

4.3 Issues facing the NXD

• flow of information, NXD can be starved of info and "frozen out"
  
• Independence of NXD - (part of family, friend of chairman?)
  
• How long should a NXD remain on board?
  
• Appointment - how should this be done?
  
• Was appointment "forced" on company by a VC?
  Induction
  
• 5 years audited accounts
  
• management accounts
  
• company literature
  
• organisation chart
  
• memorandum and articles
  
• shareholdings
  
• time commitment
  
• Insurance obligations
  
• Fees

5.0 RUNNING BOARD MEETINGS

5.1 BE PREPARED

5.2 Outputs should follow 4 "Cs"

• Conviction: that a course of action is right
  
• Commitment: from all key players (unity of purpose)
  
• Communication: about decisions to be implemented
  
• Co-operation: from those needed to carry out decision(s)

5.3 Review annually

• Composition of Board
  
• Frequency of meetings
  
• Allocation of time
  
• What 6/7 things do we need to do/get right this coming year?
  

6.0 DIRECTORS LEGAL RESPONSIBILITIES

Solvency
Statutory Requirements

For further information on any of the topics or headings contact one of the Corporate Team at Macdonald Henderson.