Different types of companies have different types of Boards and successful AIM companies judged by financial performance and with good relations with shareholders usually have one thing in common – they have effective, diverse, entrepreneurial Boards with a number of truly independent Non-Executive Directors who bring diversity and specific skills to the Board. These Non Execs will genuinely question and challenge the Executive but act in a supportive way. If the Non Execs have the right skills and experience they will not let the Execs make bad decisions or get away with remuneration agreements which are out of kilter with the size of the company.
Shareholders in AIM companies, whether institutional or individuals have become more and more conscious of the need to have effective Non Execs and the potential dangers of investing in companies who don’t have truly independent and effective Non Execs.
Some AIM companies have “obtained” their Non Execs from their Nominated Advisor (NOMAD) or Broker but these Non Execs are not chosen from a targetted long-list and seldom appointed for their specific skills and sometomes have too many roles to be effective (over-Boarded). The pool of Non Execs that NOMADs and Brokers have historically worked with has become limited. For example if the business is a technology one then the Non Execs will need to understand technology otherwise they will be “fringe” Directors and unable to add value.
The London Stock Exchange (LSE) changed the rules for AIM Companies in September 2018 which has changed the Governance landscape who now have to "comply or explain" with a recognised Governance Code. The two codes are The UK Corporate Governance Code (with its 45 or so provisions) or the Quoted Company Alliance (QCA) Code with its ten provisions. This has increased the demand in AIM COmpanies for Board Reviews, diversity on Boards and truly Independent Non Execs..One of the most crucial is that the Non Execs should be truly independent.
In 2018 First Flight became a preferred partner of the London Stock Exchange as a provider of Chairs, Non Execs & Advisory Boards to smaller quoted companies on the Main Market & AIM companies:
With a large number of AIM Clients First Flight have become a specialist Search firm for AIM companies with a process ensures that the best Non Execs are “identified” through a formal, rigorous and transparent process which will identify a wide choice of suitable candidates who have specific skills rather that an arbitrary act or the appointment of a “friend” or colleague.
All Non Execs should sit on a Sub-Committee – which includes Audit, Risk, Nomination and Remuneration and sometimes specialist Sub-Committees such as Consumer or Technology.
Who better to summarise the need to find the “right” Non Execs than Warren Buffett who says: “It is desirable for Boards to have “Outside” Directors (as he calls them) but they must:
- think and speak independently
- be business-savvy
- be genuinely interested in the company and care deeply
- be shareholder orientated
- bring useful & specific qualities to the Board
too often Outside Directors are selected simply because they are “prominent people” – this is a mistake” he concludes.
First Flight works with a number of AIM companies (and pre IPO Companies) and understands the dynamics of effective Boards and the benefits of appointing the right Non Execs.
