Non-executive directors have been getting a bad press recently, with fees for some soaring while their companies’ share prices plunge.
A poll by equity research firm Alphavalue shows average remuneration for FTSE100 outside directors up 10 per cent last year.
But can non-executive directors still represent good value for consultancies dealing with the economic downturn?
Rune Gustafson, non-executive director of the National Gallery and Graphic Alliance, among others, thinks so. ‘Non-executives can provide valuable experience in the current conditions – many will have been through previous recessions and will know how to cope,’ he says.
Despite this, 60 per cent of respondents to a recent online poll of creative companies by accountant Kingston Smith W1 said they did not have one on their board.
Mandy Merron, partnerat Kingston Smith W1, says, ‘This is a shame, because our research following the last recession showed that companies with non-executive directors on the board tended to do better.’ Iain Johnston, chief executive of Loewy, explains, ‘It takes a brave chief executive to open up the board to outsiders, and to accept criticism’, but he believes there are many benefits.
Non-executive directors can play a role in constructively challenging and contributing to the development of strategy, as well as scrutinising the performance of the management, he says.
Johnston, whose board at Loewy consists of two executive and two non-executive members, also believes that they can approach problems from a critical distance. ‘Owners and directors often can’t see the wood for the trees, so it helps to get a different perspective,’ he says.
Most importantly for the creative industries, outside directors can bring skills that the current management may lack.
Independent consultant Jonathan Hynes explains, ‘Creative agencies are about people, brilliance and expertise. But they are also businesses. To flourish they have to be about profit, growth and risk management.’ However, faced with the rising costs, some companies are choosing to hire expert consultants on an ad-hoc basis.
Madelaine Cooper, founder of business talent agency Heroes, says, ‘We can help smaller groups get a high level of expertise at an affordable cost, in a way that they can manage and budget for.’
In this way consultants with specialised knowledge can be brought in for a particular pitch or experienced professionals can be hired as general mentors on a more long-term basis.
Hynes believes that non-executive roles are better suited to larger companies where they have a duty to scrutinise the management on behalf of the shareholders.
‘For smaller companies where the directors are often the main shareholders it is more useful to employ consultants on a project basis,’ he says.
Hynes adds that he is seeing more demand for this work in the recession as companies look to ‘actively learn’ and emerge from the financial crisis in a better condition.
But it appears that many creatives are yet to be convinced of the benefits of paying for outside advice and Johnston thinks they are missing out.
‘I believe it’s one of the best investments a creative company can make,’ he says.
What to look for in a non-executive director:
- The confidence and experience to challenge decisions
- A healthy contacts book
- A knowledge of the industry
- The time and commitment to keep up to date with the company
- Knowledge that complements the existing management