Leading the Way is a column written by PricewaterhouseCoopers professional staff. It appears in the Business section of the Bangkok Post twice each month. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the September 11, 2007 issue of the Bangkok Post.
By Kulvech Janvatanavit
If you were approached to be a non-executive director for a company, would you accept or decline? What questions would you ask before making your decision? What information would you require in order to assess this opportunity?
Traditionally in Thailand, the perceived value of non-executive directors was based largely on their seniority, network and social background. However, in recent years, there has been a considerable increase in focus on the role of the non-executive director, and therefore the decision to accept this position should not be taken lightly.
The role of non-executive director is frequently described as having two principal components: monitoring executive activity and contributing to the development of strategy. As each of the board's various members utilises his or her unique skills and experience to make a contribution to the overall performance and effectiveness of the board, a non-executive director should consider his or her role in relation to that of other board members and not in isolation.
Nowadays, each non-executive director needs to be able to make a valuable contribution to the board. In addition to this, research suggests that there is a positive correlation between shareholder value and a company's corporate governance rating, and that one of the most important factors in the latter is the good functioning of the board.
If you are approached with an invitation for a non-executive director position, it is important that you consider both your own suitability, as well as the reasons you are being asked. For example, is it clear why there will be a non-executive director vacancy? If it is as a result of a conflict around matters to do with the company or its management, or a conflict of a personal nature between one or more of the board members, you should be aware of this.
Were you approached for this position by a third party? It may be better if you have been approached by someone outside of the company, for if you have been approached by the current chairman or another member of the board on the basis of current contacts, it may be more difficult to decline. A professional or more detached approach can ultimately be in the best interests of the company.
Is the reason why you have been approached for this non-executive directorship strictly a professional one? It may be appropriate for you to be asked not only for your suitability as a non-executive director, but also for access to your personal network. However, it is important that you are not called upon solely on grounds other than strictly professional ones. Bear this is mind from a point of view of integrity and possible future conflicts of interests.
Does your background and profile suit the job description? It is important that you know whether you are being asked to be chairman of the board or audit committee or a member of a sub-committee, in view of the more specific types of skills and experience that these positions demand.
Do you have sufficient time, considering your other activities, to act as a non-executive director for this company? Generally speaking, a non-executive directorship will take one working day per month for a smaller company, and at least two working days per month for a larger, listed company for preparation and meeting time. Additional time is likely to be needed for service on a board committee and this commitment can easily double in times of crisis. Weekly or even daily meetings are not exceptional in the event of a serious financial crisis. According to experts, 100 hours a year for a non-listed company and 150 to 200 hours for a listed company are commonplace.
After making the decision about whether the position is right for you, you should then take a closer look at the board itself: Is the composition and experience of the board appropriate? Do you feel comfortable with the quality and diversity of your future board colleagues?
You should also take a closer look at the company: Do you know what the main activities (products and/or services) of this company are? How transparent is the business environment in the countries in which the company operates? Are you satisfied with the reputation and competence of the auditor?
It is important that you examine any invitation to be a non-executive director thoroughly and from all angles before accepting this position.
