Director Weekly Governance fit for growth

The IoD’s new Commission on the role of non-executive directors is being launched at a critical moment.

Over the last 20 years, we’ve seen something akin to a boardroom take-over by non-execs across UK business – especially in larger companies, and in not-for-profit organisations too. There have been very valid reasons for giving NEDs an enhanced role: a desire for directors who are independent, willing to challenge executive leadership teams, and objective in their contributions to board decision making.

Yet in recent years we’ve seen the weaknesses inherent in this model exposed by a sequence of corporate governance failures. The Post Office Horizon scandal stands out, but before that was the collapse of Carillion, of BHS, and of Patisserie Valerie, among others. Non-executives’ distance can become a disadvantage.

Our new Commission will take a broad view of ways to improve how NEDs operate. Are regulatory changes needed? Does the UK’s corporate governance code need to be updated? What are the behavioural or mindset changes that directors might adopt to enhance performance? And could new technology, including AI, close the asymmetry between non-execs and execs – giving NEDs access to the information and insight that executives have at their fingertips?

The dynamic between effective oversight and accountability will be a key point of focus. We don’t want non-executives operating as a sort of corporate police force. That instantly creates a ‘them and us’ relationship with executive directors, potentially discouraging the sharing of information, of problems, and of robust discussion – all of which is detrimental to board performance.

And while we need boards to provide robust challenge and independent oversight, we also need fresh thinking about how NEDs contribute to value creation. Economic growth is, rightly, the recurring theme in every conversation about business policy at the moment. Particularly in startups and high-growth companies, do we need to put the emphasis back on how NEDs can act as advisors to support growth?

The IoD’s Commission – led by the Rt Hon. Baroness Evans of Bowes Park – will unpack all those issues. And it will be moving at speed; IoD members will have the opportunity to provide input via a consultation over the coming months, and the Commission’s report will be published in the autumn.

Having spoken on corporate governance to business audiences as far afield as Istanbul and Ljubljana in the last two weeks – and to groups in Ireland, New Zealand and Singapore in recent months – I’ve seen first-hand the level of international interest in the UK’s approach to corporate governance, and in the lessons to be drawn from recent scandals.

The standards we set here matter to the global reputation of British business, as well as being crucial to our economic growth. This Commission will raise the bar again – and help maximise non-executives’ ability to both ensure responsible risk-taking and deliver effective governance

Find out more about the Commission’s remit and its membership here.