All eyes on the NED - July QQ
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All eyes on the NED To what extent do you think increased regulation and compliance in corporate governance has made the role of the NED more appealing? From out of the shadows of the hotly discussed topic of executive remuneration, and a shareholder spring that has stormed AGMs around the UK, Chartered Secretary and CSS thought it timely to consider the role of the non-executive director (NED) as it is increasingly thrown into the spotlight. While the principle duties of NEDs have remained broadly unchanged since they were first formally addressed in the Cadbury Report in 1992, the role is now more complex, bringing with it greater reputational risk. Yet, according to a recent PwC report called, The challenging role of the NED, the role remains ‘attractive and fulfilling’ for a large number of a fundamental requirement of the NED. While some pushed for NEDs to be more collaborative, in addition to having the ability to ask the board ‘awkward’ and ‘challenging’ questions over strategies and risk management; others prefer the idea of the NED solely as an advisor, showing that the role could perhaps do with further definition in certain areas. There was also additional hesitation surrounding a NED’s ability to challenge strategies. Although 58% agreed that NEDs are well informed enough in the companies they work for to challenge management on risk strategies, one member of the corporate governance community said, ‘I doubt that in any company a NED would have sufficient knowledge of the intricacies or the nitty gritty of day-to-day operations to challenge the executive team in detail on risk strategies that may be proposed or employed by the company. To believe that this is possible when they are only engaged with the business two or three days a month is delusional.’ Several others expressed similar sentiments. Following the financial crisis, the role of the NED was bound to change as it faced criticism for not being challenging enough in the run up to a series of events that were set to change the corporate governance landscape. It is unsurprising that NEDs are now expected to engage more in this area. A NED’s influence remains a vital aspect of a company’s foundations as they continue to be regarded as effective mentors. 60% of our panel agreed that we are increasingly seeing NEDs play a more important role for SMEs and entrepreneurial ventures as they guide them through the world of business. Looking forward, it seems that the ability to add value to business and its subsequent success is where a NED’s incentive lies, but the hardening of regulation and compliance, and the subsequent challenges NEDs will face, should not be overlooked. Find out more about the role of the NED in next month’s Chartered Secretary with Jo Haigh and Charlotte Mason from Cracking Boards. » Quick question NEDs. We put this notion to the test in front of the Chartered Secretary/CSS panel. Questions surrounding the role of the NED have certainly piqued the interest of our panel as the responses came in thick and fast. Perhaps the most important point to establish is that 76% agreed that increased regulation and compliance in corporate governance has made the role less appealing, instantly contrasting with the findings in the PwC report. However, despite this, 82% agreed that NEDs add more value by helping businesses work towards their goals, thereby asserting the role as a valuable asset to one’s company. The additional comments we received from our corporate governance community demonstrated that some NEDs feel driven by the complexity of the business and the demands associated with the increased responsibilities of the role. It seems then that, although regulation has become more prescriptive, the fact that the NED is regarded as an increasingly important position, can be seen as a positive incentive. While the gender diversity debate murmurs on in the background, we wanted to gauge our panel’s opinions on whether more women should hold the role of NEDs in companies: 58% believe that they should, with only 7% disagreeing. However, it seems that the gender debate should not be used as a diversion when it comes to hiring a NED, according to our panel, as ‘the best person for the job should always be appointed. Any board that passes over a good woman for a lesser man is not acting in the best interests of the company,’ commented one respondent. In terms of skill set, those from our panel who made additional comments on the role of the NED concurred that knowledge and understanding of the underlying business should be 8%: A lot 7%: No change 76%: Made it less appealing Conducted in association with Company Secretarial Services www.charteredsecretary.net 21 If you’re a company secretary of a leading UK business, and you’d like to take part in or comment on future surveys, e-mail Caroline Evans at CSS on [email protected].
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Transcript of All eyes on the NED - July QQ
All eyes on the NEDTo what extent do you think increased regulation and compliance in corporate governance has made the role of the NED more appealing?
From out of the shadows of the hotly discussed topic of executive remuneration, and a shareholder spring that has stormed AGMs around the UK, Chartered Secretary and CSS thought it timely to consider the role of the non-executive director (NED) as it is increasingly thrown into the spotlight.
While the principle duties of NEDs have remained broadly unchanged since they were first formally addressed in the Cadbury Report in 1992, the role is now more complex, bringing with it greater reputational risk. Yet, according to a recent PwC report called, The challenging role of the NED, the role remains ‘attractive and fulfilling’ for a large number of
a fundamental requirement of the NED. While some pushed for NEDs to be more collaborative, in addition to having the ability to ask the board ‘awkward’ and ‘challenging’ questions over strategies and risk management; others prefer the idea of the NED solely as an advisor, showing that the role could perhaps do with further definition in certain areas.
There was also additional hesitation surrounding a NED’s ability to challenge strategies. Although 58% agreed that NEDs are well informed enough in the companies they work for to challenge management on risk strategies, one member of the corporate governance community said, ‘I doubt that in any company a NED would have sufficient knowledge of the intricacies or the nitty gritty of day-to-day operations to challenge the executive team in detail on risk strategies that may be proposed or employed by the company. To believe that this is possible when they are only engaged with the business two or three days a month is delusional.’ Several others expressed similar sentiments.
Following the financial crisis, the role of the NED was bound to change as it faced criticism for not being challenging enough in the run up to a series of events that were set to change the corporate governance landscape. It is unsurprising that NEDs are now expected to engage more in this area.
A NED’s influence remains a vital aspect of a company’s foundations as they continue to be regarded as effective mentors. 60% of our panel agreed that we are increasingly seeing NEDs play a more important role for SMEs and entrepreneurial ventures as they guide them through the world of business.
Looking forward, it seems that the ability to add value to business and its subsequent success is where a NED’s incentive lies, but the hardening of regulation and compliance, and the subsequent challenges NEDs will face, should not be overlooked.
Find out more about the role of the NED in next month’s Chartered Secretary with Jo Haigh and Charlotte Mason from Cracking Boards.
» Quick question
NEDs. We put this notion to the test in front of the Chartered Secretary/CSS panel.
Questions surrounding the role of the NED have certainly piqued the interest of our panel as the responses came in thick and fast. Perhaps the most important point to establish is that 76% agreed that increased regulation and compliance in corporate governance has made the role less appealing, instantly contrasting with the findings in the PwC report.
However, despite this, 82% agreed that NEDs add more value by helping businesses work towards their goals, thereby asserting the role as a valuable asset to one’s company. The additional comments we received from our corporate governance community demonstrated that some NEDs feel driven by the complexity of the business and the demands associated with the increased responsibilities of the role. It seems then that, although regulation has become more prescriptive, the fact that the NED is regarded as an increasingly important position, can be seen as a positive incentive.
While the gender diversity debate murmurs on in the background, we wanted to gauge our panel’s opinions on whether more women should hold the role of NEDs in companies: 58% believe that they should, with only 7%
disagreeing. However, it seems that the gender debate should not be used as a diversion when it comes to hiring a NED, according to our panel, as ‘the best person for the job should always be appointed. Any board that passes
over a good woman for a lesser man is not acting in the best interests of the
company,’ commented one respondent.
In terms of skill set, those from our panel who made additional comments on the role of the NED concurred that knowledge and understanding of the underlying business should be
8%: A lot
7%: No change
76%: Made it less appealing
Conducted in association with Company Secretarial Services
w w w . c h a r t e r e d s e c r e t a r y . n e t 21
If you’re a company secretary of a leading UK business, and you’d like to take part in or comment on future surveys, e-mail Caroline Evans at CSS on [email protected].
