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Men in Suits
  • Directors Institute

Executive directors should be monitored by non-executive directors

Monitoring executive directors: a roadmap for carrying out one of the most important non-executive director tasks (NED).

Your independence is critical as a non-executive director.

As a NED, you avoid overseeing the day-to-day operations of the company. This is done on purpose to shield your vision from the minutiae and allow you to focus on more important governance issues.

What are these issues? These are mostly strategy and the board itself. Your responsibility is to ensure that things work well, and your chair and CEO will rely on your candid, straight feedback in this regard.

Thus, you must immediately begin watching executive colleagues. Before you begin, you should be aware of the following:

Executive directors are being monitored, not assessed

Part of your responsibility as a NED is to assess executive colleagues and how they work as a team. This allows you to compare the board to the company plan and see if both operate well.

But keep in mind that you're only monitoring to provide honest feedback, not an inspector with a clipboard and a mark sheet trying to catch colleagues off guard.

NEDs typically – and should – participate actively in board assessment, salary, and succession planning committees, which are the right areas to offer constructive recommendations. Make the most of them.

You're looking at both groups and individuals

Each executive director be evaluated to see if they are living up to their potential and aligned with corporate goals.

It is also critical to assess the board as a whole.

Given your perspective, you should be able to detect signs of a dysfunctional board earlier than your executive colleagues. These components can vary greatly. These could range from weaknesses in the decision-making process to identifying conflicts of interest to fixing board committee structure.

Because of your independence, you will have a better understanding of this than others, hence, utilize it.

You are evaluating people in relation to strategy

Monitoring executive colleagues boils down to a comparison between their work and the company's objectives. Your responsibility is to keep a good level of knowledge on both and to apply your best judgment in providing feedback.

Make sure you understand the company's long-term and short-term goals. Make sure you understand each executive director's job, experience, and what shareholders expect from them.

Finally, when monitoring the board's success, make sure to compare leadership and strategy and utilize experience to evaluate if they combine for substantial corporate growth.

When reporting to the chair, board committees, or the CEO, be specific about the measurements and criteria you're using to assess success or places for improvement.

You've come to seek truth

Non-executive directors are rarely personally connected to a corporation. This makes their counsel critical because it is based solely on their experience-based judgment

Remember this throughout your tenure as a NED.

It's natural to develop professional ties with executive colleagues or a personal attachment to the company's reputation over time, but your purpose remains constant.

Remember to continue assessing and advising from a neutral, honest standpoint. You are one of the most vital sources of this information for your chair, CEO, and shareholders.

Our Directors’ Institute- World council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.

Our ESG Expert certification will help you to amplify your understanding of corporate governance in a detailed manner paving a way for you to become a globally recognized ESG leader.

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