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AIM businesses looking for a new breed of NED

AIM businesses looking for a new breed of NED

Chief Executives keen to take on their first NED role earlier in their career

A new model of Non-Executive Directorship is emerging at smaller and AIM-listed companies which are increasingly looking to recruit current Chief Executives and other senior executive directors to play a more active part in supporting the company’s development say Edward Drummond, the leading executive search firm.

Edward Drummond explains that many businesses hope that a more hands-on approach from the Non-Executive Directors (NEDs) on their boards will help propel growth.  

Edward Drummond says the demand from small companies to get their NEDs closer to the day-to-day running of the business is in sharp contrast to the trend at larger listed companies where NEDs have become increasingly bogged down with corporate governance work.

Neill Fry, Director at Edward Drummond, says: “Smaller listed corporates really value the additional insight and independent scrutiny that a NED brings, but they increasingly want to bring that insight to bear on the actual running of the firm as well as using NEDs in the traditional way as a sounding-board on strategic issues and a guard dog for shareholders.”

“They want NEDs that will roll their sleeves up, and feel they are more likely to get this with current directors who have experience of the issues facing businesses in today’s economic climate.”

“It’s a very attractive proposition from a potential candidate’s viewpoint too, as many of these businesses are prepared to recruit NEDs at an early stage in their career. It gives them the opportunity to broaden their experience.”

Edward Drummond says that this means that many smaller companies are less interested in employing a career NED and more interested in securing NEDs with very contemporary management skills.

Adds Neill Fry: “These NED positions are in different sectors from the Chief Executives’ main role, so there is no possible conflict of interest.  In fact, the NED’s full time employer will often value the additional experience being gained and see it as a good way of retaining a talented and ambitious Chief Executive.

Increased focus on corporate governance a priority for larger PLCs or FTSE 100

Edward Drummond says that the nature of the NED role has also changed at larger PLCs and FTSE 100 businesses because institutional shareholders and regulators are demanding greater board transparency and accountability from larger companies.

“Since the financial crisis there is now much more emphasis on areas like executive pay, risk management, the relationship with auditors and other external suppliers and checking for compliance with the Bribery Act.”

“As a result the nature of the NED role at the biggest businesses is changing towards one that can be almost entirely focused on corporate governance.”

“These issues aren’t such a priority for smaller companies which are usually simpler in structure. The urgent priorities for an AIM company is grow revenues, increase profits and improve cash flow. That is what they want the NEDs to help with” says Neill Fry.  

Increased appetite from Chief Execs or Senior Directors to take NED roles

Edward Drummond reports that there has also been a rise in the number of senior Directors or Chief Executives looking for NED positions with a fast growing company.

Explains Neill Fry: “Chief Execs and senior Directors are now coming to us to talk about non-executive directorships long before they are contemplating moving on from their current role.”

“Salary is certainly not the main motivating factor many see this as a good way to take their career forward in the long-term and take on a fresh challenge without giving up their main job.”

“We frequently find that they are far more attracted by the mentoring aspect that this new breed of NED role can involve than a bumper pay packet. They also know that broadening their sector experience will improve their long-term prospects.”


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