Should third sector leaders be non-executive directors?

It's crazy time here at SSE….having recruited two new staff in three new regional SSEs, we're now mid-recruitment of three posts at SSE-UK here in East London. And we have been rewarded with our largest pile of CVs ever……

Whilst thinking about recruitment, I thought I'd draw attention to a different area of recruitment that has a broad relevance to the third sector. As many have pointed out, the failure of our financial institutions is also a failure of corporate governance which is, in turn, a failure of non-executive directors (NEDs). David Walker's recent report on corporate governance acknowledges this, and suggests doubling the number of days that NEDs contribute to a company per year.

This does seem an inadequate response, though. As The World of GingerbreadGirl points out:

"if you use the same people you will have the same answers, the same
approaches, and the same problems – whether or not you cut their pay,
double their pay, cut their days, or double them. If you always do what
you have always done, you will always get what you always got.

She suggests that every board should have to have one NED that has never been an NED before…in order to cut down on the cronyism, (old boy) networks and lack of variety that has affected the ability of non-execs to perform their role over the last few years. Matthew Cain follows on from this with some sensible questions that should form a basic check on whether a person can be an NED who will bring value to the corporate governance process. And points out that NEDs aren't a panacea to this problem, which is surely right.

But that doesn't mean it shouldn't be addressed.

So how does this relate to "our" world? Well, firstly because the same applies to charitable boards: as Eleanor at NPC points out in her post (with the does-what-it-says-on-the-tin title of Networks aren't the answer for boards: get some fresh blood for a change),

"Trustee boards in the charity sector in the UK face remarkably similar
problems. Most (around 80%) recruit new board members from their
networks. 'Word of mouth' is great for getting people who you know and
trust, but it means that you are looking in a very small pool of people"

This is surely true. We work hard with SSE students (and Fellows) to think hard about different types of governance structure, and about the make-up of their boards (if they have them). And that challenge of being aligned to the mission, but not too close to it; of being trusted, but not uncritical; of being a good mix of skills, but also a good team… etc

Secondly, and to return to GingerbreadGirls' original point about widening the pool of talent, surely there are people from the charity and social enterprise sectors who would add credibility, acuity, insight and experience to some corporate boards? This is something we've been looking at on the Social Enterprise Ambassadors programme and was called for at an event the other evening by leading charity lawyer Stephen Lloyd, who was reported as saying:

"that at least one non-executive director of all quoted
companies should have extensive experience of the social/voluntary
sector to add a new perspective to board discussions

Again, getting leading charity or social enterprise directors as non-exec directors is by no means a panacea, but it would surely bring a fresh pair of (credible) eyes to the table, combined with experience of running a significant organisation. And would also foster better understanding in both sectors about the differing demands and natures of each.

[Writing this post as part of Bloggers' Circle, an initiative to share posts cross-blog and get interesting posts more widely-read.]

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2 thoughts on “Should third sector leaders be non-executive directors?

  1. Another excellent post Nick, although it is not surprising that we in the social enterprise sector are calling for people with experience in social enterprise to become NEDs then, is it?
    I thank you for your post and Stephen Lloyd for his comment and hopefully the surge in demand for social enterprise NEDs will lead to some serious wage inflation!
    On a more serious and less summery note, I did enjoy your reflections–especially the comment by the Gingerbread Girl, which you highlight, that in the mainstream economy we keep getting the same old answers because its the same old people (white men, mostly) and the answers we need are new. I think some variety is a good idea, but would not go so far as to mandate that each Board should have someone who has never sat on one. They cannot be deemed qualified because they have no experience–that feels a bit perverse. Boards should be comprised of experienced people with a blend of backgrounds and skills–and it is the job of the Chair, to bring those diverse skills to good use. I look forward to your ruminations on Chairs soon!
    best, rod

  2. Some good points Nick and it is not that difficult to recruit outside your ‘cirles’.
    We have a board and have advertised to ensure we have a variety of people. We have no white men on our commitee. We are fortuntate to attract a wide variety to reflect the beneficaries who we receive our services. This means our board also has a number of younger members on it as well.
    If you are small and basically unknown advertising can attract people who have not been on boards before but they can still offer a lot of expertise from within the field in which they work
    New people and ideas are important to keep things fresh and to offer a new perspective.