The role and value of a non-executive director is less well defined for SMEs than for listed companies, meaning growth opportunities may be missed, according to new research.

Law firm TLT partnered with UWE’s Business and Law School, The Association of Chartered Certified Accountants, Transpire and Practice, to undertake a study on the role and importance of NEDs to SMEs.

It found that although there is no legal requirement for SMEs to appoint NEDs to boards, there was an appetite for them in the SME market, and an understanding on the potential they could bring, but that this knowledge was far from widespread.

While small and medium sized businesses want NEDs to demonstrate passion, business knowledge and bring their experience of corporate strategy and business growth to the table, the businesses also need to be certain of the value-add given its more limited time and resources, it found.

“What is clear from this study and our experience at TLT is that the majority of SMEs do not have a NED in place, even when they would benefit greatly from engaging one at an early stage of their business growth cycle,” read the report.

“There is a lack of awareness of the benefits a NED can bring, how to recruit a NED and how to use them to their full potential. The appointment of a NED is not just a governance issue, but should be looked at as a strategic decision to help move the business forward.”