Top 10 questions to ask before becoming a NED (Part 2)
Last week we shared five of the 10 top questions you should ask before becoming a Non-executive Director. Here are the other five we ran out of time for…
6 What does the on-boarding process entail for new board directors?
Understanding the steps involved in your on-boarding process will help you prepare and manage your expectations. We suggest you ask the following as a minimum:
- Is there a formal training program for new directors? If there's a structured orientation or training program, it can help you get up to speed quickly about your duties, responsibilities, and about the organisation.
- Who will be my mentor or point of contact during this process? Having a designated person to guide you through can make the process smoother and less overwhelming.
- What resources will be available to me to better understand my role and the organisation? Resources like documents, previous meeting minutes, strategic plans, etc., can provide insights into the workings of the organisation.
7 What is the company's strategic direction?
This involves knowing the company's mission, vision, and strategic goals. It helps you gauge the company's growth trajectory and identify potential challenges. Additionally, understanding the strategic direction can help you bring valuable insights to the board, contributing to strategic planning and decision-making processes.
To ensure a successful tenure as a NED, it's important that the company's plan aligns with your areas of expertise and interests. You can assess this by reviewing the company's strategic plan, mission statement, and business model. Consider whether your skills and experience can add value to the company's strategic goals. Also, reflect on whether the company's industry, values, and culture align with your personal and professional interests.
8 What remunerations can I expect?
Compensation for NED roles vary widely based on factors like the size and industry of the company, the responsibilities of the role, and the experience level of the director. While some NED roles are unpaid, others may offer substantial remuneration. It's important to understand the expected time commitment and responsibilities of the role to assess whether the compensation is fair.
Several factors can influence the compensation for NED roles. These include the size and financial health of the company, the industry in which the company operates, the complexity of the role, and the experience and skills of the NED. For instance, larger companies or those in highly regulated industries may offer higher compensation. Similarly, roles requiring specific expertise, or a significant time commitment may also command higher pay.
9 What is the company's approach to risk management?
Understanding the company's approach to risk management is crucial. It provides insight into how the company identifies, assesses, and mitigates risks. This can range from financial and operational risks to strategic and reputational risks. A sound approach to risk management can indicate a well-run company that is likely to withstand unexpected challenges.
Key risk areas to inquire about include financial risks, operational risks, strategic risks, compliance risks, and reputational risks. Understanding these risks will give you a comprehensive view of the company's risk profile. It's also important to understand how these risks are managed, including the procedures in place to mitigate them and the company's past track record in dealing with similar risks.
10 How are conflicts of interest handled?
Transparency in handling potential conflicts of interest is crucial to maintaining trust among stakeholders, including employees, shareholders, and customers. It demonstrates the company's commitment to ethical conduct and good governance. When a company is transparent about potential conflicts, it shows that it prioritises fairness and integrity, which can enhance its reputation.
Transparency also helps prevent misunderstandings that can arise from perceived conflicts of interest. It allows all involved parties to understand the situation clearly and take appropriate steps to mitigate any potential negative impact.
Furthermore, transparency in conflict resolution ensures accountability. When actions are taken openly, it's easier to hold individuals or groups accountable for their decisions and actions. This can deter unethical behaviour and promote a culture of honesty and responsibility.
QUESTIONS TO ASK TO ASSESS THE COMPANY'S APPROACH
To assess the company's approach to handling potential conflicts of interest, you might consider asking the following questions:
- Does the company have a formal conflict of interest policy? A written policy typically outlines the process for identifying, disclosing, and managing conflicts of interest.
- How are potential conflicts of interest disclosed to the board and other stakeholders? The disclosure process is an important part of managing conflicts of interest. It should be timely, clear, and comprehensive.
- What procedures are in place to manage conflicts of interest? This could involve recusal from decision-making processes or divestment of conflicting interests.
- Can you provide examples of how previous conflicts of interest were handled? Past actions will give insight into how the company might handle future conflicts.
- How does the company ensure ongoing compliance with its conflict-of-interest policy? This might involve regular reviews of the policy, training for board members and staff, or monitoring by a designated ethics officer or committee.
By asking these questions, you can gain a better understanding of the company's commitment to transparency and ethical conduct.
Leverage these and the first five questions we shared to gain a deep understanding of what to expect - and what is expected of you - so you can find the Non-Executive Director role that is the right fit for you.
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