Poll results : Attitudes to the roles of the non-executive director

84% disagree with Lord Young's view that NEDs can never know enough to fulfill their obligations and are therefore a waste of time.

46% have worked with a non-executive director whose decisions have had a negative impact on the business they represent.

Over the last 12 weeks, Sovereign Capital, the independent UK mid-market private equity provider, has sponsored an on-line poll in association with Directorbank on 'Attitudes to the role of the non-executive director'. (Directorbank's audience is the venture capital, corporate finance and senior executive communities.)

NEDs are a resource frequently used by venture capitalists in portfolio companies. With the recent accounting scandals placing focus on the statutory and moral responsibilities of the NED, Sovereign Capital wanted to gauge current sentiment to some of the issues raised in the last few months.

Key findings include:

• Finding: 84% of professionals and executives disagreed with Lord Young's view that NEDs can never know enough to fulfil their obligations and are therefore a waste of time.

  Sovereign comment: The poll revealed that this same audience does not agree on what the primary role of the NED should be. Is it accountability, objectivity, strategic input, door-opening or good practice? With these options receiving near equal responses in the poll, the lack of clarity and agreement on this subject is highlighted. However the question raises the key issues and differences between expectation and reality./p>

• Finding: 46% have worked with a non-executive director whose decisions have had a negative impact on the business they represent.

  Sovereign comment: It is key to appoint the right person for the job. Within a business backed by a private equity house, there would typically be several NEDs with a responsibility to protect and enhance shareholder value. The key criteria for selection of a NED for a VC include:

  1. Has an entrepreneurial background / have done it before themselves in an executive capacity

  2 .Is willing to make a financial commitment to the company

  3. Is knowledgeable in the sector

  4. Is financially 'responsible'

  5. Understands the growing pains of an expanding company

  6. Has a proven record of recognising a management team's strengths and weaknesses

• Finding: 69% believe that the maximum number of non-executive Director positions they should hold is 3 to 5.

  Sovereign comment: The government says, however, that it is not going to impose an upper limit.

• Finding: 63% believe a NED's financial involvement in a company is closely related to their performance.

  Sovereign comment: This begs the question of conflict of interest. Will the NED dig very deep to uncover aspects to the business that may devalue their equity? The level of equity participation should therefore be enough to provide an incentive, but small enough that it does not distract the NED from their role of corporate governance.

Peter Brooks, Managing Director, Sovereign Capital, commented:

"We believe that the role of the NED is a crucial one. If they are to be effective in their role, then it is only logical that they carry significant responsibility. After all, they have full voting rights. This means that the time and remuneration an NED would commit and receive should reflect the size and infrastructure of the company. In the case of a large plc, the cost impact may well therefore be significant.

Anyone who considers becoming an NED should be fully prepared to take on the responsibilities and the consequences, good or bad, that come with it. For those that do not want such responsibility, then they should leave the board and consider becoming a consultant. What undoubtedly is needed, is a much clearer and more realistic guide to the roles and responsibilities of the NED and the associated independent powers that go with it."