Do I really need to hire non-executive directors to help secure investment?
We have just hired a corporate finance boutique to help us secure future funding for our business, a £12m turnover medical services company. They suggested our first step should be to hire at least two non-execs to beef up our board’s credentials for investors. I believe this is false cosmetic window dressing. Am I wrong? And how important are the non-executive team to an investor?
A. Stephen Goschalk of Insinger de Beaufort writes:
The appointment of non-executive directors should definitely not be considered as “cosmetic window dressing”. They should be seen as bringing an independent sounding board and an input to strategic thinking for the further development of your business. Having built up a company with a £12m turnover, you clearly know your business, and non-exec directors should add to any future development.
The right non-executives will also add credibility to the presentation of the company to potential investors. This is particularly true if you are going into the public market, where non-execs are a necessity rather than a luxury. If you are going for private equity, then the investors will certainly wish to have non-executive directors appointed by them on the board. Unfortunately, these may not add as much value as independent non-executives, since they may consider the interests of the private equity investor ahead of yours. Therefore, to balance this situation, having your own non-executives would be an advantage.
When choosing non-executive directors, pick those with relevant experience and whose opinions you respect. If you select the right people, they can be a valuable asset to your company.