So you want to become a non-executive director on the new FAI Board?

By David W. Duffy, Ireland’s leading published author on Corporate Governance and Founder of The Governance Company

Assuming all goes well in establishing fit for purpose governance in the FAI (V2), there will be a requirement to recruit a number of non-executive directors (NED) to bring independence and objectivity and perhaps other competencies that have been absent to date in the FAI (V1)!

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10 questions you should consider first

So if you considering such a career move, what questions should you seek answers to before you throw your hat in the ring?

  1. What will be my role on the new Board?
  2. Will the new Board have a totally independent chair? It should!
  3. Who else will be on the Board and can I see their detailed CVs?
  4. How long will it take before the organisation has fit for purpose accounting records and reporting systems?
  5. Is the organisation solvent and can I see the evidence?
  6. Can I meet the some of the leaders of the various soccer leagues around the country to get a sense of the extent of change required?
  7. What plans are being considered to rebuild an appropriate culture and trust in the FAI (V2) amongst the members, volunteers, funders, sponsors, UEFA etc
  8. What will be the time commitment given the seismic changes that will be required in developing new governance structures and trust at all levels?
  9. What are the downside risks for me as a NED?
  10. What will be the scope of the Directors and Officers Insurance?

Note:  This list is only a sample.

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The roles of Directors

So what is a non-executive director responsible for? Here are some of the main ones.

1. The most important role directors have is to ensure that the organisation has the appropriate culture to support its future ambitions. The Italians say “A fish rots from the head”, so if the culture of the board is inappropriate or even toxic then, then the organisation will be in terminal decline. A good culture will attract good staff who can relate to that culture and all that it stands for. Poor culture will have the opposite impact.

2. Ensure that the organisation has fit for purpose governance structures.  This includes making sure that the following are in the place and are well documented:

  • Clarity of roles for the Board, Chair, Directors, CEO and Company Secretary.
  • Terms of reference for all Board committees.
  • Clarity on the decisions that Board can take and those that are delegated do the CEO.
  • Risk register which is updated monthly and reported against to the Board.
  • Clarity on the Role of the Board vs the Management team.

3. The job of the Board is to focus on the big picture and not to get dragged down into the detail.  Directors are there to direct, not to manage, as that is the job of the executive.  “Nose in but fingers out” as the phrase goes.

4. The organisation recruits Board members who have the skills and experience to support the future direction of the organisation.  So if the organisation is a bank and wants to target the 18 -30 age group, then somebody on the board needs to know about the world of digital media and how millennials’ think!

5. Ensure that it has a strategic plan for a 3-5 year period that sets out the ambition of the organisation, with clear goals, objectives, actions and KPI’s that enable the Board to hold the Executive to account in its delivery of the plan.

6. Hiring or firing the CEO.

7. Making sure that the organisation has fit for purpose accounting systems to enable the board to be able to assess the financial status of the organisation at any one time. If the organisation is having cash flow issues, then this is a sign that it may be trading while insolvent which is not a place that any organisation wants to be. 

8. Ensuring the Board reports to the company in general meeting and files all the relevant financial reports with CRO and any other regulatory bodies

9. Ensuring that the board is compliant with all its statutory obligations, for example, filing accurate PRSI, VAT returns on time, complying with employment, health and safety, environmental regulations etc.

Note:  This list is only a sample.

Source: iStock

Some Potential Consequences for Directors

The consequences for the board of directors not performing their role properly can be many, varied and very serious. So, for example:

1. If the governance of the organisation is poor then the reputation of the organisation and the directors will suffer, senior management and staff will leave, customers and sponsors will migrate to organisations they trust, and terminal decline will beckon.

2. If the organisation has no clearly articulated strategy, then there is no real context for decision making, and it will be difficult to hold the executive to account.

3. If the wrong CEO is selected the following can happen:

  • The organisation will stagnate because of a lack of vision and poor leadership.
  • Poor leadership can lead to the departure of key staff.
  • Innovation and productivity will decline as the staff do not believe in the CEO.
  • Morale collapses and the company risks terminal decline.

4. If the company is trading while insolvent, then the directors can become personally liable for the liabilities of the company as the protection of limited liability will have been lifted.  In a worse case situation, their personal assets will be at risk.

5. Broadly speaking, directors can face up to ten years in jail or a fine of €500,000 if they are found guilty of breaching company law.

Note:  This list is only a sample.

The lesson is…

The lesson is – make sure you do your homework in advance before accepting any NED position on a Board. The lists above are just samples of what you should ask, what you will be responsible for and what the potential consequences are for the board of directors not performing their role properly.

Read more about how to be an effective director in A Practical Guide To Corporate Governance authored by David W. Duffy and published by Chartered Accountants Ireland.

Want to learn more? Led by David W. Duffy, our 2-day Corporate Governance Bootcamp will help you to understand your responsibilities and perform your role as a board member more effectively.

About the author

David W. Duffy is Ireland’s leading published author on corporate governance based on over 20 years of advising on the topic nationally and internationally.

David is founder of The Governance Company with the ambition to make corporate governance a topic that is engaging, stimulating and fun for those who need to know. Get in touch for topical and practical articles and insights from the world of governance or follow The Governance Company on LinkedIn and Twitter

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