1. Boardroom Dynamics 023 8074 44501 Benefits of NED’s in the SME Sector Presented by Leslie Spiers MA MBA DMS CertEd Boardroom Dynamics Ltd

2. Boardroom Dynamics 023 8074 44502 The business literature is unanimous  Board is no longer a cosy affair  Proactive and transparent  Growth in status of NED = more scrutiny  Diverse opinions improve the board decisions  Effective boards = Mix of Exec and NED

3. Boardroom Dynamics 023 8074 44503 Appointing NED’s  Historically poor - Smoke filled rooms  Fewer than 4% have formal interview  Fewer than1/3 Chairs help NED induction  Diversity vs. group think vs.quotas

4. Boardroom Dynamics 023 8074 44504 Directors’ legal requirements Now codified in Companies Act 2006 Act within your powers 1. 1. Promote the success of the company for members 2. 2. Exercise independent judgment 3. 3. Exercise reasonable care, skill and diligence 4. 4. A general duty to avoid conflict of interest 5. 5. Duty not to accept benefits from 3 rd parties 6. 6. Duty to declare an interest in proposed transactions

5. Boardroom Dynamics 023 8074 44505 The Board Accountability To the company To Owners To regulators and legislators To Stakeholders Ensuring Directorial Audit Policy Formulation Stating Purpose Creating Vision and Values Developing corporate climate Monitoring the external environment Strategic Thinking Market Positioning Setting corporate direction Reviewing resources Setting implementation processes Supervising Management Performance Management Budgetary Control Review of key business results Organisational capability SHORT TERMLONG TERM Operations Review Cycle INTERNAL EXTERNAL Governance Review CycleStrategy Review Cycle Responsibilities of the Board

6. Boardroom Dynamics 023 8074 44506 Board composition & organisation "A Board may be composed of brilliant individuals and yet be ineffective. It can only fulfill its true potential as a Board if it is properly selected, organised and led." Good practice for directors – Standards for the Board

7. Boardroom Dynamics 023 8074 44507 Directors……  Establish clarity of mission, vision and values to lead the broad direction of the company  Decide upon the strategies and structure to ensure the company's survival & prosperity  Delegate to management and involve staff to effect implementation of strategy, policies & plans  Exercise responsibility to shareholders and other interested parties to promote & meet their legitimate interests

8. Boardroom Dynamics 023 8074 44508 The Role of the NED  “To help build a successful company”  Higgs suggests 4 components –Strategy –Performance –Risk –People  The role is to balance monitoring with strategic aspects

9. Boardroom Dynamics 023 8074 44509 NED Engagement in Strategy SWOT PEST LIED Porter Boston Box Ansoff Matrix Strategic Alternatives Strategic Choice Strategy Implementation Where most CEOs Engage their NEDs in Strategy Optimal Point to Engage NED in Board Strategy

10. Boardroom Dynamics 023 8074 445010

11. Boardroom Dynamics 023 8074 445011 Keep a close eye on risk !

12. Boardroom Dynamics 023 8074 445012 People and performance  Confidential, structured interviews typically conducted by a third party but sometimes conducted by the Chairman, the Chair of the Nominating/Governance Committee or the corporate secretary; this methodology is used by 43% of UK boards What was the most significant decision this board made in the past year? If you could change one thing about this board, what would you change – and why? What do you see as the board’s most important priorities over the next 6, 12, 18 months? How would you describe the working relationship between the board and the CEO? What are the major risks facing this company?

13. Boardroom Dynamics 023 8074 445013 What are the benefits of an NED? Strategic and long term perspective Financial scrutiny, business compliance and governance Monitors executive decisions Independent mentor and sounding board Constructive challenger, reflector and pain in the bum Performance monitoring and driving ethical matters Dealing with risk and managing change Director evaluation and remuneration Source of appeal (and reason), fire fighter Over reliance on one person Restrains power mad entrepreneurs/motivates lazy devils

14. Boardroom Dynamics 023 8074 445014 NED Remuneration Fees for <£5m Turnover LQMedianUQ Chairman60001800035000 NED100501500029350 Fees for >£5m to <£50m Turnover Chairman183373000041750 NED100002000028750 Source: IOD Croner Reward, Director Remuneration, October 2008

15. Boardroom Dynamics 023 8074 445015 NED Time Input (Days pa) <£5m Turnover Mean Chairman24 NED14 >£5m to <£50m Turnover Chairman44 NED14 Source: IOD Croner Reward, Director Remuneration, October 2008

16. Boardroom Dynamics 023 8074 445016 Strategic Direction Contributes creatively and realistically to planning 2 Can balance needs and constraints2 Has deep knowledge and understanding of strategy 1 Holding to Account Accepts personal accountability for delivering agreed actions 2 Challenges constructively and effectively3 Contributes to effective governance 1 Influencing & Communication Manages board meetings and board processes well 2 Persuades with well-chosen arguments3 Uses facts and figures to support argument3 Uses subtle and informal tactics to persuade 2 Team Working Involves others in decision-making process 2 Respects other team members1 Understands the Non-Executive Chairman’s role1 Coaches and mentors other directors2 Shares expertise and knowledge freely3 Personal Qualities Assertive without being aggressive 2 Acts confidently and is accessible2 Willing to accept a challenge2 Enthusiastic and a champion of the business2 Emotionally resilient and a stable influence on the board 2

17. Boardroom Dynamics 023 8074 445017 Characteristics  What is the make up of the NED?  What are implications for –Selection –Induction –Performance Measurement

18. Boardroom Dynamics 023 8074 445018 NED Requirements Skills Experience Characteristics

19. Boardroom Dynamics 023 8074 445019 NED Characteristics CounsellorSpeak-outerSounding Board Wailing WallBullet-biterStand-in Put in toucherTeam LeaderStimulatorNurturerAdviserExpeditor DisagreerEncouragerComparerFollow-upperCopywriterEnhancer PartnerKite flyerCritical friendIntervenerIdea providerTeacher SubstituteQuestionerSellerFacilitatorCatalystRecommender Helper outerTacticianDismisserChallengerDrafterMountain Guide ListenerAutocratJudgeJuryNegotiator Supporter

20. Boardroom Dynamics 023 8074 445020 Why Characteristics Matter Characteristics Tasks Job Complexity SimpleDifficult

21. Boardroom Dynamics 023 8074 445021 What drives our Behaviour? Skill Knowledge Social Role Self Image Traits Motives Easy to acquire Harder to acquire

22. Boardroom Dynamics 023 8074 445022 So, what is needed? Understanding Context Relationships Influencing the context Proactive Self Confidence Insightful Integrity Working the Context

23. Boardroom Dynamics 023 8074 445023 Insightful Integrity  The foundation stone of the NED  Not just about honesty  Alert and engaged  Guarding against complacency  Scan the business and its context  Ask brave and probing questions  Identify and distil important issues  Willing to act in line with insights

24. Boardroom Dynamics 023 8074 445024 What is needed? Understanding Context Relationships Influencing the context Proactive Self Confidence Insightful Integrity Working the Context

25. Boardroom Dynamics 023 8074 445025 Proactive Self Confidence  The confidence to challenge the Board/CEO  Facing the issue of being a minority  Comfortable asking the awkward question  Having positive intent  Challenge with support  Knowing when and how to make impact

26. Boardroom Dynamics 023 8074 445026 Proactive Self Confidence  Asking questions and feeling stupid at times  Not just sitting and being dumb  If it does not sound right - open it up  Action without rocking the boat

27. Boardroom Dynamics 023 8074 445027 What is needed? Understanding Context Relationships Influencing the context Proactive Self Confidence Insightful Integrity Working the Context

28. Boardroom Dynamics 023 8074 445028 Working the Context  Ability to understand the context  Knowing the dynamics of the board  Possessing a degree of realism  Sustaining the right relationships  Influencing the context  Ability to make things happen

29. Boardroom Dynamics 023 8074 445029 Becoming an effective Non-Executive Director: A leadership programme for aspiring and new Non-Executive Directors in the SME sector. Board Development for Non-Executive Directors from Boardroom Dynamics Ltd. Need more? Duration, Date and Venue Monday March 22 nd 9.3am until 5.00pm Guildsrealm House, Ensign Way, Hamble, SO31 4RF