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NEDs - effectiveness - Coggle Diagram
NEDs - effectiveness
Time commitments
NEDs may spent at most one or two days a month on the company's business although this may be moe for committee chairs
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Some individuals have been accused of holding too many NED positions with the result being that they cannot possibly give sufficient time to any of the companies concerned
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One indicator that a NED does not have sufficient time might be apatchy attendance records, the Code requires the annual report to set out the individual attendance by directors at board and committee meetings
When making new appointments, the board should take into account other demands on directors time. Prior to appointment, significant commitments should be discussed with an indication of the time involved. Additional external appointments should not be undertaken without prior approval of the board, with the reasons for permitting significant appointments explained the annual report
The FRC guidance also tackles the issues of time commitments and overbearing. NEDs are expected to undertake that they will have sufficient time to meet what is expected of them effectively. Letters of appointment should set out the expected time commitment. Nomination committees are encoruaged to consider whether to set limits on the number and scale of other appointments in order to address shareholder concerns about overboarding
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NEDs are meant to bring outside experience and independent judgement to bear on the deliberations of the board, they may also bring specialist expertise that may otherwise be lacking on the board
NEDs should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account
On appointment, devote time to a comprehensive, formal and tailored induction in order to understand the culture of the organisation and the way things are done and to gain insight into the experience and concerns of the workforce
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Devote time to developing and refreshing their knowledge and skills to ensure that they continue to make a positive contribution to the board and generate the respect of the other directors
Insist on receiving high quality information sufficiently In advance so that there can be through consideration of the issues prior to and informed debate and challenge at board meetings
Seek clarification or amplification from management where they consider the information provided is inadequate or lacks clarity
Take opportunities to meet shareholders, key customers and members of the workforce from all levels of the organisation in order to develop a good understanding of the business and its relationship with significant stakeholders
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The NEDs also need high-quality, accurate and timely information if they are to make a useful contribution to board deliberations