What is a “non-exec”?
A Non-Executive Director (non-exec) is a part-time role as opposed to the normal full-time directors of a company. They normally bring skills, contacts and guidance to businesses. Although part-time they are legally as much directors of the company as the full-time ones. They will not however have anyone reporting to them and will not generally be involved in the day-to-day running of the business.
Aren’t they just for large companies?
Traditionally it has been the larger company or PLC that has had non-executive directors and a major part of their job comprised corporate governance. However, more lately, smaller companies and even start-up businesses have taken on non-execs to fill out their management team with experienced and well connected business people.
What are the benefits?
Firstly you need to recognise that non-execs are part of the management team, therefore not the same as consultants or even mentors, however just like consultants & mentors, they will bring benefits in terms of their knowledge and experience.
- Non-execs can provide expertise that you normally could not afford to buy.
- They are more committed than consultants or professional advisors.
- Adds credibility to the management team (especially helpful to gain funding).
- May have contacts that would assist with obtaining sales or in understanding the market.
- May purchase shares in the business, or have access to funding sources.
- Will be a sounding boarding for the MD or CEO.
- Brings years of experience to bear when looking at proposed business plans.
- Can provide crucial guidance at critical stages of a business.
- Fill particular skill gaps which the owners or founders of a young company may have.
How much time do they spend with the business?
Often non-execs will also have a full-time job, or have more than one non-exec role, as long as it's not a competitor this is good, because it is this outside knowledge and contacts that you will find valuable. Generally you should expect them to be present at monthly management meetings and on a few other days during the year, on average say 18 - 20 days. The actual time is entirely up to yourselves to agree.
How do non-execs get remunerated?
Again this is negotiable and there are quite a few permutations available. Some are paid by the day, some may have bought or been given shares in the business that attract dividends and some may have an annual retainer. The amount will vary depending on whether you are a large PLC or a start-up. A 2006 survey from the Institute of Directors (IOD) found that for those working in larger companies the average pay per day was £2,080, and for medium size companies it was £867. For small businesses it could be less and for start-ups it may solely be shares in the business that get earned over a period of time.
As an example, one privately owned medium size company (approx £1M T/O) gave a 1 or 2 percent share of the business to each of two non-execs (the full-time directors/founders owned the rest), based on this they paid the non-execs a share dividend equating to about £400 a month. This paid for the non-execs time and ensured they had a keen interest in the company.
For many non-execs it isn't just about earning money however, these are people who have made their mark already and may be looking to encourage and help aspiring young businesses to achieve. They may be happy with just a small monthly retainer, or welcome the ability to purchase or earn shares in an exciting opportunity.
Where do I find a non-exec? How do I become a non-exec?
Your perfect non-exec may already be known to you. For smaller companies it may be someone you worked with in the past, or a client that already knows the business sector and has good industry contacts. There may be a well-known or prestigious person in your industry that you could confidentially approach. You have to consider what it is that you are looking to achieve; more clients, help with business planning, a credible management team, etc. and approach the right type of experienced person who has the right contacts.
This site (Company Partners) has many experienced members looking for interesting non-exec opportunities and you can approach them through the site. Like-wise there are many young businesses looking for experienced help and they also can be found in the search pages.
There are specialised agencies who deal with non-exec positions and a quick search on Google will bring up many. They do tend to concentrate on medium to larger companies and of course there will be a fee involved somewhere.