Why use First Flight

Why Use First Flight for your Non-Executive Directors?

1. Introduction:

Government-led reviews in the last few years which were the pre-cursor of the Combined Code on Corporate Governance (now called the Corporate Governance Code) set out standards of good practise for UK companies and has as one of its main stipulations under Code A.3 regarding Board Balance and independence: The Board should include a balance of executive and Non-Executive Directors (and in particular independent Non-Executive Directors) such that no individual or small group of individuals can dominate the Board's decision taking.

The Combined Code states in their Code A.3.2: Except for smaller companies (one that is below the FTSE 350), at least half the Board, excluding the Chairman, should comprise Non-Executive Directors determined by the Board to be independent. A smaller company should have at least two independent Non-Executive Directors.

AIM companies should have at least two Non Execs and PLUS companies at least one.

A Non-Exec has responsibilities as a "corporate policeman or watchdog" with adherence to good practise, adherence to Boardroom disciplines, corporate governance and corporate responsibilities.

2. Why appoint a Non-Executive Director?

All Directors, including Non Execs are required to:

  • Provide entrepreneurial leadership of the company;
  • Set the company's strategic aims; and
  • Set the company's values and standards and ensure that its obligations to its shareholders and others are understood and met.

In addition the role of the Non Exec has the following key elements:

  • Strategy. Non-Execs should constructively challenge & help develop proposals on strategy.
  • Performance. Non-Execs should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
  • Risk. Non-Execs should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible.
  • People. Non-Execs are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, executive directors and in succession planning.

3. What benefits do Non-Executive Directors bring to your Company:

  • strengthen the Board and provides an independent viewpoint;
  • contribute to the creation of a sound business plan, policy and strategy;
  • review plans and budgets which will implement policy and strategy;
  • be a confidential sounding board for the MD/CEO and to keep the focus of the MD/CEO;
  • has the experience to objectively assess the company's overall performance;
  • has the experience and confidence to stand firm when he or she believes the Executive Directors are acting in an inappropriate manner;
  • provide outside experience of the workings of other companies and industries and should have beneficial sector contacts & experience gained in previous businesses;
  • have the ability to clearly communicate with fellow directors;
  • have the ability to gain the respect of the other directors, and it helps if he or she is liked, but is not essential.
  • possess the tact and skill to work with the executive directors, providing support and encouragement where difficult decisions are being made;
  • provide contacts with third parties such as financial sources, grant availability, potential clients etc. and
  • provide comfort to a company's suppliers, Bankers and funders.

4. What a company typically pays a Non Exec in fees & for what?

  • The average time commitment for a Non-Exec is 24-30 days pa which increases for larger companies;
  • The average time commitment for a Chairman is 30-40 days pa which increases for larger companies due to the number of Board sub-committees such as Audit and Remuneration which take up about 15% of the time.
  • Board meetings including preparation tend to take up about 40% of the time spent with Strategy and Planning meetings taking a further 10% of the time and sub committees taking another 20%.
    The average pay for a Chair of an AIM listed company is between £1k and £1.7k per day for smaller companies and £2-3k for larger companies; this works out at around £36k pa for a small company and up to £60k pa for a larger company.
  • The average pay for a Non Exec in an AIM listed company is around £1.3k per day for smaller companies and £1.8k per day for larger companies; this works out at around £24k pa for a small company and up to £45k pa for a larger company.
  • 15% of Chairman and 10% of Non Execs receive part of their fees in shares.
  • The prevalence of share options in AIM listed companies is high and around half of Non Execs own part of their company.

5. Cronyism and fees:

  • The big City "Search" firms charge a flat fee iro £40-60k or more for providing a Chair or Non-Executive Director, they have expensive offices and large research departments to justify their fees.
  • However most companies below the FTSE 350 cannot afford fees of this magnitude and as a result resort to the 'old-boy network' or cronyism, as Sir Derek Higgs called it, which does not provide transparency or indeed choice and has to be an unacceptable way of recruiting Non Execs in 2010.
  • Furthermore the big City firms tend to work within a 'small Non Exec gene pool' and the same Non Execs seem to appear on multiple Boards - is this a healthy situation?
  • So what are the options for AIM Companies who are looking for high calibre & effective Non-Executive Directors but with an efficient and realistically priced service? 
  • First Flight is the only UK Company focused solely on providing Chair and Non-Executive Directors and has the largest Non Exec database in the UK (4,400 high calibre Non Execs - selected from 35,000 CVs) & have placed some 100 Non Execs into over 80 client companies.
  • First Flight pioneered the concept of investing Non Execs and over £4m has been invested to date by their Non Execs.
  • First Flight's success comes from operating from a database which provides fresh talent drawn from a variety of sectors with most having had Non Exec roles. This is supported with discreet search and focused advertising which allows appropriate candidates to be identified within 3 weeks, therefore clients enjoy the benefits of a fast and specialised service with competitive fees which are half what the big City firms charge.
  • In light of much recent debate about good Corporate Governance, enlightened companies are asking: what is the right balance in the boardroom? How should Boards be made up and what mix of skills and expertise will be right in the post-recession environment? Now is the time for leaders to be shaping their Board to maximise opportunities for growth and meeting the challenges going forward - First Flight understands these issues.

Some of the information in this article is taken from First Flight's Survey of Non-Executive Directors in Unquoted, AIM & PLUS companies which provides interesting information on the role of Non Execs, their fees etc.