How To Become A Non-Executive Director In South Africa

A non-executive director is a member of a company’s board of directors who is not part of the executive team.

What is a non-executive director in South Africa?

Non-executive directorships are common in listed companies but not in private companies. Non-executive directors are used to represent the views of significant shareholders or have been appointed for their governance, finance or technical skills linked to the company’s operations or to serve on audit committees.

Can non-executive director be paid salary?

Since, non-executive directors, including independent directors, devote their valuable time and have experience to give critical advice to the company. Now NED and ID can be remunerated annually from Rs. 12 lakhs (in case of negative effective capital) to 24 lakhs plus 0.01% of the effective capital in excess of Rs.

Benefits of becoming a non-executive director in South Africa

Building a portfolio career has become a positive career choice for many professionals. Here are some of the reasons why you may decide to apply for a NED role:

Grow professionally and personally.

Contribute to the sustainable success of an organization.

Make use of your experience and expertise.

Be challenged intellectually.

Learn new skills.

Importance of non-executive directors

NEDs act as a sounding board for the executive directors, provide an objective and independent view, bring constructive challenges and support the executive team in making good decisions for the sustainable success of the organisation.

NEDs also complement the skills and expertise of the executive team.

They bring a wealth of experience gained in different roles and environments, a range of skills acquired in other sectors and expertise needed for the organization to succeed.

NEDs often bring new or fresh perspectives that enrich boardroom debates and discussions.

Key attributes of a non-executive director in South Africa

Traditionally, becoming a NED was regarded as the logical next step for senior executives, particularly those looking to remain connected with the business world, contribute their experiences and skills, and seek an additional income stream in retirement.

However, the opportunities, risks and challenges faced by businesses now require boards to adapt their recruitment strategy and expand their talent pool. There is growing pressure for boards to become more diverse in terms of:

Gender

Ethnicity

Background

Age

Can a CEO be a non-executive director?

As against, the non-executive directors tend to consider and review the company’s strategies and policies. While the company’s Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Managing Director (MD), are the executive director of the firm, Chairman is the non-executive director.

How are non-executive directors appointed In South Africa?

The company appoints non-executive directors through a letter of appointment and does not employ them. Non-executive directors typically sit on the main board and have responsibility on the board sub-committees (e.g. Audit Committee, Risk Committee, Nomination Committee, Remuneration Committee).

Can non-executive director own shares?

Any director, including a NED, need not own shares in accompany of which they are a director. You may wish to give them some shares or some share options to tie them in and, for small companies, it may be preferable to pay in shares or options rather than cash.

What are the risks of being a non-executive director?

Legal risks for non-executive directors

Due Diligence.

Has the director been negligent

Time commitment – be clear.

Conflicts of Interest for company directors.

Protecting yourself as a non-executive director.

Can non-executive directors be employees?

Non-executive directors provide independent oversight and serve on committees concerned with sensitive issues such as the pay of the executive directors and other senior managers; they are usually paid a fee for their services but are not regarded as employees.

Do non-executive directors need insurance?

When it comes to personal liability, a company will usually stand behind its NEDs provided they have not acted dishonestly. However, NEDs should check, as part of their due diligence, whether their actions while performing their director duties will be covered by an adequate D&O insurance taken out by the company.

Do non-executive directors get sick pay?

Although an office-holder, a non-executive director will not usually fall within the definition of ’employee’ for most employment purposes. They will not therefore qualify as employed earners for tax purposes and hence will not be eligible for SSP.

Are non-executive directors entitled to annual leave?

Leave entitlements: employees are entitled to annual leave, long service leave and personal leave etc., directors are not. Directors will generally receive dividends.