What makes a good INED?

By Patrick Gibbons

First things first – what is an ‘INED’?  It stands for ‘Independent Non-Executive Director’.

An INED is an independent member of the Board of Directors of a business entity, with a part-time role in the affairs of the firm, taking responsibility, on an equal footing, with the executive directors but is not an executive manager or employee in the day to day running of the enterprise.

An INED can have multiple useful roles in a business, depending on its needs and stage of development. Among them an INED can be:

• a cost-efficient professional adviser/sounding board,
• a supportive voice of reason,
• a constructive critic & devil’s advocate,
• an experienced consultant,
• a wise, seasoned counsellor,
• a warning beacon against risk,
• an independent overseer of the performance of the executive team, the delivery of the agreed strategy and accountability for agreed expenditure,
• someone with specific professional experience who understands good governance and how a board and its meetings should be run,
• an assistant in recruiting new board members and setting the salary of executive directors.

At its heart, the role of an INED can be that of an independent strategist who can help those bogged down in the day to day running of the business separate the wood from the trees by giving executive colleagues a sense-check of where the business, its strategy, finances and risk profile fit in to the world outside the business, including the regulatory landscape, if applicable. This will help guide them, through a mix of probing, questioning and advising, to a better path which will improve the systems and controls of the business, make it more efficient and cost effective and ultimately, aim to give it more opportunities to improve its offering, compete better and increase profitability.

Who becomes an INED?

Most INEDs come from backgrounds spent in business or the professions with at least a decade of experience in senior executive roles. I myself, a solicitor by profession, spent 14 years in senior in-house legal and compliance roles in the financial services industry before I became a full-time INED in 2011. I had considerable experience of risk management, Central Bank of Ireland regulation and compliance with the many rules and regulations governing the insurance industry before I took my first board role. I also had been at enough board meetings to know the dynamic and could judge what worked and what didn’t in terms of board-level paperwork and relationships.

Top skills required to be a good INED

• Strong Professional Background – You can’t be a valuable INED without professional experience in your career to date that is of value to the Board of the business. This could be legal, compliance, risk management, governance, regulatory relations, accountancy etc. One of the main assets an INED can bring is how to actually run the Board business efficiently – improve the quality of Board papers, facilitate quality, substantive discussions at Board meetings and enhance the minute-taking, bearing in mind that for regulated businesses in particular, accurate record-keeping is vitally important.
• Quick learner – You will need to take in a huge amount of information about the business in a very short time if you are to contribute anything useful, process it, filter it to what is relevant and make judgements based on it using your past experience and skillset.
• Sound Judgement – First principles apply in that you need to know the difference between right and wrong, ethically and morally, in order to help direct a sustainable business, particularly in a regulated sector. You will also have many other judgement calls to make at board level on strategic, risk, governance and financial matters as well as constructively challenging the executive management on these matters.
• Independence – You would be of little use to the business if you just melded along with the executive directors and didn’t pose any thought-provoking questions or constructive challenges to current thinking on the formulation of strategy and on accountability for its delivery. Your colleagues need you to be a devil’s advocate to raise the awkward questions and to articulate the potential pitfalls to the best laid plans that competitors or regulators might be about to probe and take advantage of.
• Relationship Building – You need to be able to communicate your views on issues effectively in order to impart your experience and exercise your judgement. You will only gain the respect of colleagues and get them to listen to your point of view if you can successfully get across to them that what you are advocating is in the best interests of the business. While there may be short-term upset at constructive challenge and criticism, the mutual respect that will emerge from your advice making a difference to the business over time will build solid relationships with colleagues and stakeholders alike.

Conclusion

Being an INED is a personal service to a business, a willing part-time worker who comes to the boardroom with no tools other than the INED’s experience, common sense and personal attributes. Experience is of no value unless you can use it by imparting it to others. The busy boardroom is precisely the right place to which to bring a lifetime’s knowledge and experience that, when deployed effectively, can be a powerful impetus for fresh and challenging thinking that can make all the difference to a board and the business it governs in becoming a high performer.

About the author

A full-time Independent Non-Executive Director (INED) for the last decade, Patrick Gibbons has served on boards of directors and chaired Audit & Risk Committees in the financial services sector in life assurance, pensions and investments and securitisation and in the public sector, on a number of State boards, giving him diversity in sectors from healthcare to natural resources and climate action.

A solicitor for 25 years, Patrick spent his earlier career in the financial services industry specialising in legal and regulatory compliance, corporate governance and risk management in senior management roles in a variety of regulated financial services firms, including Allianz, New Ireland, Scottish Provident and Royal Liver.

Email Address: patrick.gibbons502@gmail.com

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