Spotlight on Non-executive Directors

The senior managers’ regime has upped the stakes for some non-executive directors (chairs of audit, risk, remuneration and nomination committees; the senior independent director; the board Chair) and there’s a danger of other NEDs falling by the wayside.  Here are some thoughts that might adjust that balance, looking through a regulatory lens.  General corporate governance requirements and fiduciary duties aren’t the focus of this piece.

1          Regarding the NED skill-set, the bar keeps getting higher.  Regulators now expect NEDs to be well-versed in all relevant topics (including IT, culture, conduct and risk).  There’s no abdicating responsibility to the ‘expert’ on the board.

2          Know the business.  See it in action; meet people doing the work; speak to them – at as wide a range of locations as you can manage.  It’ll provide insights about what happens on the ground that you won’t get from management reports.  I’ve seen, repeatedly, over the years that there’s no substitute for it.

3          Get the right MI.  It should include analysis (including trend analysis) in words, not just charts, graphs, tables and figures and if you’re not getting what you need, ask for it until you do receive that.  It’s your responsibility.

4          Get the right training.  Again, it’s up to you to say what you need and follow up on that.  Under the SMR, the onus is far more on the individual director to specify the training that’s required and that premise is acquiring wider application across the NED community.

5          Keep records.  Evidence what you do, from training to what’s said at board meetings.  If it isn’t written down, it hasn’t happened.

6          Challenge, probe and ask questions.  This is probably the most important part of a NED’s role and never just accept what you’re told if you’re not completely sure about that.  A key question here is How do you know what you’re being told is correct?

7          Aim for equality and diversity in board composition but … always appoint the best person for the position.  That might involve going back to the market if there’s a lack of equality and diversity in the initial search.

8          And a word about the SID.  Whistleblowing is becoming an extremely important topic and that’s one for you.  It should also be a concern if there’s no sign of whistleblowing within the organisation and you should ask questions if that’s the case.

 

The blog and all entries on it are intended to provide general information about recent and expected items that might be of interest.  Neither the blog nor any entry provides or constitutes, or purports to provide or constitute, advice relevant to any particular circumstances.  Legal or other professional advice relevant to any particular circumstances should always be sought.

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