WAKING NED
(a paradigm shift in appointing non executive directors)
So what has professional directorship got to do with a movie set in Ireland, filmed on the Isle of Man, whose major player is actually dead and the whole community eventually collude together to get lots of money and share it between them?
Too much is the answer for many today and perception is almost more important than reality in this case. For too long the notion of being a non executive director (NEDs) as a natural progression following a long and happy career, an almost logical reward, has been how NED appointments have been filled. In fact it has already been suggested that www.nods.im be a more appropriate title as a place for those who vote things through on the nod... The movie is really about honesty and integrity, and how a whole village manage to fool "the Lotto" and share the winnings around. What begins as an idea of a few soon becomes an adopted belief in its rightness and indeed a good deed, then becomes infectious and it ends up with the population joining in the masquerade and they of course succeed in fooling the authorities. You might be forgiven for comparing this sorry scene to many of the corporate tragedies that have all fueled the current financial problems the world is in. In many peoples eyes it is plain and simple greed that drove businesses down the path of higher risk towards higher reward, whilst ignoring the risk aspect: perception in this regard actually replaces fact as populations judge their governments on what they see and believe. So in fact the message of Waking Ned does in fact have something to say to us today. The essence of a village is to be a supportive community, and in the movie we see this go to extreme lengths, yet there is something to draw out if it that leads us to another point - something that is easily missed in the noise of current world events, that NEDS belong in all businesses, not just those in the financial sector. The benefit of having non executive support was recognised in the Higgs Report and then the UK Combined Code, which is even more direct on how NEDS should be represented in boards. A NED is fundamentally someone of honesty, integrity and truthfulness; someone who has experience both in business and probably a specialism, and therefore can bring that expertise and skill to the benefit of the company as a whole. But there is more; a NED is like a critical friend, one in whom an executive director can confide and look to for help; indeed, NEDS are encouraged to take up the role of mentor to executive directors, providing a mechanism for growth and development to them. And of course like most of life, this is a two way street, one where NEDS and “EDS” each learn more and all to the good of the business as a whole. This is how a NED can fulfill the legal and professional mantra of delivering a duty of care and skill, to act in the best interests of and to contribute towards the success of the company.
But where does NEDS IOM (www.neds.im) fit in? We went public on Friday April 24th and already membership has almost doubled. Following the positive site release regarding the Advisory Board and substantial support already received from all sources, the press release expanded on the reasons why NEDS IOM exists.
For too long the method of finding an NED has been more smoke and mirrors than anything else, and putting ease of access well down the process. For some time it has been clear that NED selection from a referral, based on knowing someone who knows someone, has served its day. Post Credit Crunch, Enron, WorldCom, Northern Rock, post AIG, post Lehman and a myriad of others, the world is changing - we are now in a new normal, where long held beliefs and paradigms need to change. Since its inception in February this year, NEDS IOM has already become the foremost Register of NEDS in the IOM, its target market. Today, the stereotype of a NED as more a NOD has been washed away completely, and the need to be a professional, informed and ideally qualified director, let alone a NED, is already a necessity and will inevitably become a requirement. Being professional and informed is an entry point, being qualified and involved, knowing the business, KYB if you like, will become the standard. Post G20 this year, there is an appetite, a hunger, to see regulation and oversight dramatically improved, with directors at the forefront, forced to lead the world in how to run businesses properly - you might say as they always should have.
Which of course has nothing to do with recent world events. Or does it? We live in a time where the unthinkable happens daily, where previously and long held beliefs are compromised and where plain old greed seems to win over common sense. You do not need to look far to see these evidenced, the cases above are only a few but there is ample evidence if you look. So how does NEDS IOM fit in? Why should we care? Isn't Waking NED a valid perception by the general public?
It is if you don't care; care about your professionalism and pride, about the interests of the business you represent. The primary function of any director, is not to look after the shareholders, to approve senior management plans or even to know what the business is up to: these are all important elements, but the primary function of any director, is "to promote the success of the Company" this cannot be done by presence alone - active engagement, involvement with the business and fulfilling the duty of care and skill - that is the way to change the world.
And that is where NEDS IOM seeks to change things - by being a central register of NEDs, where boards and their agents can easily search through profiles, to allow them to match their needs with the skills and experience of the directors who are available. By encouraging NEDS to be knowledgeable, informed, trained, qualified; this is the way to change the world. Step by step, but with a whole hearted response to the needs of the world - it is no longer acceptable to stand back and let things happen, we need to respond, to take action, to stand up and be leaders. NEDS have lots to offer, experience and contacts are key reasons why they have value, but today, more than ever before, that is not enough: this is the way to change the paradigm, to be those who bring in the new normal, to be NEDS not NODS, that is how we will wake NED.
John C Sheath
May 5, 2009
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www.neds.im
See the original article from Money Media magazine.
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