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Defining the Role and Duties of a Non-Executive Director

Author Jon MillsJon Mills

11 min read
Better Business

Osome’s article unveils the world of non-executive directors in Singapore. From understanding their roles in corporate governance, discussing responsibilities and considerations, to comparing with executive directors, we cover it all. Gain insights into how you can excel in this crucial role.

Defining the Role and Duties of a Non-Executive Director

Think the role of a non-executive director in Singapore? If so, you’ll need to familiarise yourself with the job's requirements and expectations. In this article, we'll dissect what it is non-executive directors do, differentiate their role from the executive director's role, delve into what it takes to be a non-executive director in Singapore, and consider the advantages this position offers. Additionally, we'll offer guidance on how you can enhance your contributions in this position.

What Is a Non-Executive Director?

A non-executive director is a board member of a company, detached from the routine operations of the business. They serve as the company's compass, offering advice, direction, and supervision to ensure alignment with the company's goals and objectives. Non-executive directors are expected to inject fresh insights into the board, always advocating for the company stakeholders' best interests.

Appointed for their proficiency in specific fields such as finance, marketing, or law, non-executive directors typically aren't company employees and stay clear of managing the business. Their role is to offer independent viewpoints on company performance and strategic planning.

We spoke to Deepti Laddha, Osome’s Corporate Secretarial & Immigration Manager about non-executive directors, this is what she had to say:

“A non-executive director is someone who does not indulge in the day to day operations of the company, but provides a view on the strategies of the business, and questions the way things are done. You can refer to them as someone who is not involved daily but gives feedback and insights in decision making — but they do not make the overall decisions.” — Deepti Laddha, Corporate Secretarial & Immigration Manager at Osome

The role of non-executive directors in corporate governance

Non-executive directors are indispensable cogs in the corporate governance machinery. Their primary role is to promote responsible and ethical business conduct. They also act as a counterbalance to the executive directors, who are in charge of the company's everyday management.

A crucial responsibility for a non-executive director is to question the executive directors, making them answerable for their decisions. This becomes especially crucial when the company faces significant choices like mergers and acquisitions, or when conflicts of interest arise between the executive directors and the company's stakeholders.

Non-executive directors also function as advisers and guides to the executive team. They bring fresh perspectives on the company's strategies, help identify areas requiring enhancement, and offer valuable insights into the industry and market, including valuable input on KPI for product development. They help the executive team stay current with industry trends and developments.

Bridging stakeholder relations

Non-executive directors can play a significant role in cultivating solid relationships between the company and its stakeholders. They can serve as mediators between the board and shareholders, ensuring representation of their interests. They also help foster relations with other stakeholders, including customers, suppliers, and regulatory bodies.

Non-executive directors are a crucial part of corporate governance. They offer independent oversight and direction, ensuring the company operates responsibly and ethically. They bring new ideas to the board, helping identify areas for growth. Ultimately, non-executive directors play a significant role in ensuring the company's long-term prosperity.

8 Responsibilities of a Non-Executive Director

The success of a company can rely on its non-executive directors. They offer independent insight and guidance to the board, ensuring that the company is run in the best interests of all stakeholders. Here are the eight key responsibilities of a non-executive director:

  1. Performance review

As a NED (Non-Executive Director), you are the watchful eye, critically evaluating the company's performance based on various metrics and key performance indicators. You're not simply ticking boxes; you’re analysing these data points, assessing trends, and comparing them against industry standards. You'll use your objective viewpoint to identify areas of strength, as well as pinpointing areas that need improvement. Furthermore, you're expected to provide constructive feedback, advising on actions that can steer the company towards better performance and improved efficiency.

  1. Strategic direction

Business plan template

Your role as a NED involves shaping the strategic direction of the business. You'll work in tandem with other board members, leveraging your expertise and business acumen to help the company craft its long-term goals and the strategic path to reach them. You'll offer fresh insights, challenge the status quo when necessary, and make sure the company remains adaptable in the face of changing market trends. By understanding the company's core competencies, its market position, and the industry landscape, you'll provide invaluable input that drives the strategic planning process.

  1. Time commitment

Being a NED is not a part-time role, even though it is non-executive. It requires a substantial time commitment to understand the business's workings, including its operational model, financial structure, and the industry it operates within. You'll also need to keep up-to-date with regulatory changes, technological advancements, and evolving industry trends that could impact the business. Furthermore, preparing for board meetings, reviewing documents, and conducting independent research also demand significant time.

  1. Risk management

Every business faces risks, and as a NED, part of your responsibility is helping the company identify and manage them effectively. This may involve examining potential operational, financial, strategic, and compliance risks, then working alongside the executive team to develop risk mitigation strategies. This process is critical to safeguard the company's assets, reputation, and overall business continuity.

  1. People

Your role as a NED extends into key human resource decisions as well. You'll be involved in appointing or dismissing senior management and evaluating their performance. You'll help ensure the right individuals hold leadership roles, creating a balanced team that can drive the company's vision forward. Furthermore, you'll assist in setting the right tone at the top, promoting a positive corporate culture that supports ethical conduct and a commitment to compliance.

  1. Professional development

As a NED, you're committed to continuous learning, and this professional development benefits not only you but also the company and its board. By staying informed about the latest industry trends, regulatory changes, and best practices in corporate governance, you can bring cutting-edge knowledge and insights to the table. Moreover, you'll be expected to foster an environment of learning within the board, encouraging and facilitating the professional development of your fellow directors.

  1. Participation in committee meetings

Participation in board and committee meetings is more than just showing up. You'll actively engage in discussions, ask challenging questions, and contribute to making critical decisions that will shape the company's future. In these meetings, you'll exercise due diligence, ensuring that the company fulfills its legal, financial, and ethical obligations. You're also expected to take an informed stand on issues, bringing your independent judgment to bear in board decisions.

  1. Special considerations

As a NED in Singapore, you have the added responsibility of understanding the specific guidelines and regulations in the city-state's robust corporate governance framework. Familiarity with Singapore's Companies Act, its code of corporate governance, and other related regulations is crucial. In addition, you must appreciate the local business culture, taking into account the unique socio-economic and cultural nuances that could influence business operations and decision-making.

So, being a Non-Executive Director is a serious commitment, involving critical thinking, strategic insight, risk management acumen, and an in-depth understanding of people dynamics. You'll also need to be dedicated to continuous learning, active participation in board meetings, and navigating Singapore's unique business and regulatory landscape. It's a challenging role, but one that can be deeply rewarding for those ready to take up the mantle.

If you’re looking to open a business in Singapore but are based abroad, you’ll need to appoint a nominee director in Singapore.

Understanding Non-Executive Directors

While the precise responsibilities of a non-executive director might vary across different companies, their core duty remains constant: to offer impartial advice and guidance. Non-executive directors carry no executive accountability for company management and are not involved in everyday business operations.

Non-executive directors are welcomed onto the board for their expertise and seasoned experience in distinct fields. Typically, they boast extensive knowledge in areas like finance, legal matters, and governance, and they are expected to possess an in-depth understanding of the company's operations and the industry it navigates.

Non-executive directors in the corporate governance landscape

Non-executive directors are pivotal players in corporate governance, tasked with ensuring the company operates responsibly and ethically. They serve as a counterbalance to the executive directors, lending an independent viewpoint to the company's strategic planning and decision-making processes.

A crucial advantage of having non-executive directors on the board is the fresh perspective they offer on the company's operations. Since they are not absorbed in the daily management of the business, they can provide an unbiased view of the company's performance and suggest ways to improve.

Upholding compliance and guiding the executive team

Non-executive directors carry the responsibility of ensuring the company adheres to all pertinent laws and regulations. They collaborate with the executive team to devise policies and procedures that foster transparency and accountability.

Another vital role non-executive directors fulfil is offering guidance and support to the executive team. They can serve as a sounding board for innovative ideas and initiatives, providing valuable feedback and advice rooted in their experience and expertise.

Non-executive directors are crucial contributors to a company's success. They bring a treasure trove of knowledge and experience to the boardroom, offering an independent perspective on the company's operations and helping to ensure that the company operates responsibly and ethically.

4 Things That Non-Executive Directors Should Consider

Here’s a few unique responsibilities that non-executive directors should consider when taking on the role.

  1. Keep the company’s interests in mind

The main duty of non-executive directors is to act in the company's best interests consistently. This means prioritising the needs of the company and its stakeholders over personal benefits. Non-executive directors must steer clear of conflicts of interest and refrain from any activity that might jeopardise their neutrality or objectivity.

  1. Be a stickler for the rules

Non-executive directors need to remain mindful of and adhere to all laws and regulations that dictate their conduct. This encompasses laws related to insider trading, conflicts of interest, and corporate governance. Non-executive directors should also get to know the company's code of conduct and ensure their actions align with the company's values and principles.

  1. Understand your remit

Non-executive directors should also understand their position relative to the executive directors and the board in its entirety. Although non-executive directors do not engage in the daily management of the company, they are entrusted with overseeing and guiding the executive directors. They should work in harmony with the executive directors and be prepared to question them when necessary.

  1. It all takes commitment

Non-executive directors should demonstrate a commitment to their role and be ready to invest the time and effort needed to fulfil their duties. This commitment includes attending board meetings, contributing to committees, and staying current with relevant industry developments.

The Difference Between Non-Executive Directors and Executive Directors

The main difference between an executive director and a non-executive director lies in their involvement in the company's daily management. While an executive director dives into the company's operations and shapes strategic decisions, a non-executive director stays on the sidelines, offering independent advice and guidance to the executive directors and the board. As such, non-executive directors usually have less hands-on involvement in the company's operations compared to their executive counterparts.

Here’s a bit more information about appointing a company director.

Deepti shared the benefits of a non-executive director, saying:

“The company receives valuable inputs and insights on it's policies and procedures, risk governance and brings different perspective” — Deepti Laddha

Examples of a Non-Executive Director

To bring the roles and responsibilities of non-executive directors to life, let's delve into a hypothetical scenario, to show the advantages a non-executive director can bring to a business.

Consider the former COO of a multinational manufacturing company who decides to step into the shoes of a non-executive director for a burgeoning clean energy startup. In their position on the board, they might be expected to:

  • Use their wealth of experience to advise the company as it navigates the complexities of product development and market introduction in the renewable energy sector.
  • Share insights with the executive directors on potential obstacles or market trends that could pose challenges to the business and its profitability.

Often, non-executive directors hold prominent standing in their respective fields, leading to robust industry networks. In this case, our former manufacturing COO might have well-established connections with government agencies and industry bodies. These relationships could be invaluable to the clean energy startup as it aims to navigate regulatory landscapes and secure partnerships for its growth and expansion.

How To Become an Independent Director or a Non-Executive Director

To become a director or a non-executive director in Singapore, you first need to meet the qualifications required by law. Generally, you must:

  • Be at least 18 years old;
  • Have not been declared bankrupt;
  • Have a clean criminal record;
  • Have relevant experience and expertise in the field in which the company operates.

To increase your chances of being selected as a non-executive director, you should attend relevant training courses and seminars and obtain relevant professional qualifications. You should also build a network of contacts in the industry and seek out opportunities to gain board experience, such as serving as a director of a non-profit organisation. It is also essential to have good communication and interpersonal skills, as these are critical to fulfilling the role of a non-executive director effectively.

What Qualifications Do I Need as a Non-Executive Director in Singapore?

While specific requirements can differ across industries, some general necessities stand true.

There are three big things you’ll need to be comfortable with, no matter the industry: finance, legal matters, and governance. You'll need to understand company financials, stay on top of industry-specific regulations and laws, and grasp the nuances of corporate governance.

Standout leadership and communication skills are a definite plus. As a non-executive director, you're expected to collaborate effectively with the board, express your ideas clearly, and sometimes even lead the charge.

Thinking strategically is another essential trait. Non-executive directors are valued for their ability to contribute to the company's strategic direction and goals.

Don't forget, learning is a constant journey. Engaging in relevant training and seminars, obtaining professional qualifications, and continuous upskilling can strengthen your candidacy.

Networking is invaluable. Forge strong connections within your industry and seek out opportunities for board experience, perhaps by serving on a non-profit board.

Finally, strong interpersonal skills are key. As a non-executive director, you'll interact with various stakeholders and need to effectively communicate in board discussions.

Armed with these qualifications, you'll be well-prepared to contribute significantly as a non-executive director, effectively serving the company and its stakeholders. It's a demanding role, but with the right qualifications, you're ready to make a difference.

How To Excel as a Non-Executive Director in Singapore

Start by diving deep into the company's mission, vision, and objectives. Be well-versed with the industry's pulse, keeping an eye on industry trends and updates. Staying informed about legal or regulatory changes that might impact the company is also a must.

Nurture robust relationships with the executive directors and your fellow board members. Excellent communication is the heart of these relationships. You should be able to articulate your thoughts clearly and be willing to have those necessary challenging conversations.

Remember, it's not about confrontation but constructive dialogue. Don't shy away from holding executive directors accountable when needed and providing valuable feedback and guidance.

By embracing these strategies, you'll strengthen your role as a non-executive director, positioning yourself as an essential contributor to the company's success.

One more thing we can help with…

Why not check out our guide to income tax for directors and company owners in Singapore?

Step Inside the Boardroom

Taking on the role of a non-executive director in Singapore is a fulfilling journey, with opportunities to offer insights and guide a company towards its goals. With the right qualifications, robust industry connections, and strong communication skills, you're all set to excel in the role and make a significant impact.

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