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The Distinctive Roles of Non-Executive Directors (NEDs) and Advisory

Introduction


In the complex and dynamic world of business leadership, the roles of Non-Executive Directors (NEDs) and advisors often overlap, leading to confusion. However, there are fundamental differences that distinguish these two roles. This article seeks to clarify these differences, drawing heavily from the rich experience of Richard Keenlyside, a seasoned business director, advisor and NED, whose profile can be found on his website https://rjk.info and his LinkedIn page https://www.linkedin.com/in/richardkeenlyside.


The Role of Non-Executive Directors


NEDs, like Richard Keenlyside, play a crucial role in providing unbiased oversight and strategic guidance to organisations. They are part of the company's board but are not involved in daily operations, which allows them to maintain an objective perspective.


The Role of Advisors


Advisors, on the other hand, are external consultants who provide expert advice and guidance on specific areas based on their expertise. They are not part of the board and do not have any legal or fiduciary responsibilities towards the company.


Three Key Differences Between NEDs and Advisors


Legal and Fiduciary Responsibilities


NEDs have legal and fiduciary responsibilities towards the company and its shareholders. They are held accountable for the company's performance and compliance with regulations. Advisors, however, do not have these responsibilities.


Involvement in Strategic Decision-making


NEDs are involved in strategic decision-making processes and have voting rights on the board. They contribute to major decisions such as CEO appointment, executive remuneration, and corporate strategy. Advisors, however, do not have voting rights, and their role is primarily advisory.


Long-term Commitment


NEDs are generally appointed for a fixed term and are expected to provide long-term strategic guidance. Advisors, however, are typically engaged on a project basis or for a specific period.


Conclusion


While both NEDs and advisors play crucial roles in guiding businesses, their responsibilities, involvement in decision-making, and commitment vary significantly. Understanding these differences is key to leveraging their expertise effectively.


Q&A


Q1: What are the legal responsibilities of a Non-Executive Director?

A1: NEDs have legal and fiduciary responsibilities towards the company and its shareholders. They are accountable for the company's performance and compliance with regulations.


Q2: Do advisors have voting rights in the company?

A2: No, advisors do not have voting rights. Their role is primarily advisory.


Q3: Are Non-Executive Directors involved in the day-to-day operations of the company?

A3: No, NEDs are not involved in the daily operations of the company. This allows them to maintain an unbiased perspective.


Q4: Do advisors have a long-term commitment to the company?

A4: Advisors are typically engaged on a project basis or for a specific period, so their commitment may not be long-term.


Q5: What is the role of a Non-Executive Director in strategic decision-making?

A5: NEDs are involved in strategic decision-making processes and have voting rights on the board. They contribute to major decisions such as CEO appointment, executive remuneration, and corporate strategy.

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