The role (in a nutshell)

A Non-Executive Director is a member of the board of Directors of a company. He/she does not form part of the executive management team, is not an employee of the company or affiliated with it in any other way.

Non-Executive Directors are the custodians of the governance process and have responsibilities for:

• Strategy: Non-executive directors are not involved in the day-to-day running of business but monitor the executive activity and should constructively challenge and contribute to the development of strategy.
• Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitoring, participate in succession planning and where necessary remove senior management.

Non-Executive Directors should also provide independent views on:

• Resources
• Appointments
• Standards of conduct

Non-Executive Directors help provide long-term vision and should act as mentors to senior staff. They should be networkers, looking for new opportunities and useful contacts and they should act as relationship builders, both inside and outside of the company.

Entrance requirements include having significant relevant industry experience and a sound track record in senior management at executive level.

• Advantages - Non-Executive Directors say the most enjoyable aspect of the role is when their insight and impartiality make a real difference to a business. Being able to use their experience and keeping an eye on financial matters comes a close second.
• Disadvantages - Legally, Non-Executive Directors are every bit as liable as their full-time colleagues if things go wrong.
• Future - The consensus is that the 'corporate governance' aspects of the role will become increasingly onerous. Non-Executive Directors may be paid even more to reflect their greater responsibilities.

Fees 

PricewaterhouseCoopers (PWC) have just released a Report on Non-Executive Directors Best Practices and Fees in South Africa.

According to the survey, "Non-Executive Directors in small-cap businesses (defined as companies with a market capitalisation of less than R1 billion) earned R109 000. Non-executive Chairmen could command about R862 000 per year while Non-Executive Directors at the top end of the bracket earned about R352 000.

PWC indicated that the number of Non-Executive Directors in South Africa had been on the up in 2008. This has been attributed to a number of black economic empowerment deals. Mining (358 Non-Executive Directors), Industrial Goods and Services (285 Non-Executive Directors) and Financial Services (255 Non-Executive Directors) made up the three biggest employers of non-executive directors in South Africa.

Doing the right thing in 2009 will be tough for Non-Executive Directors as a result of the difficult trading conditions being experienced globally."

Conclusions of the PricewaterhouseCoopers (PWC) survey

• From a South African perspective there are relatively few Non-Executive Directors with the necessary knowledge and expertise available and the level of non-executive fees is on the low side when compared with the risk.
• As a result there is a reluctance from suitable individuals to take on Non-Executive Director positions as a directorship comes with huge responsibility.
• Demand for expertise will certainly make Non-Executive Directors more expensive in order for companies to retain them in 2009.

During 2008 the average annual fee received by the Non-Executive Directors appointed to Boards through Woodburn Mann was R130 000 for the Board appointment. In addition the average fee paid to Non-Executive Directors for serving on the Audit Committee was R83 000 (Chairman R135 000) and for serving on other Board sub-committees the average was R54 000 (Chairman R105 000). 

The average annual fee received by the Chairman of Boards appointed through Woodburn Mann during 2008 was R900 000.

Further reading Non Executive Chairman & Directors

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