Claire’s Column – NEDs: Don’t Throw The Baby Out With The Bathwater

Published on: 26 Feb, 2015
Updated on: 26 Feb, 2015

In this regular column – a must-read for all those interested in Guildford business – Claire Dee fights the corner of the non-executive director of whom there are many in the town.

Claire Dee

An interesting debate has ensued this week surrounding non-executive directors (NEDs).

Following announcements last year, we were already aware that senior figures in the financial world could face personal responsibility for their organisation’s failings, but more recent proposals from the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) means this could extend to non-executive board members.

While I’m all for accountability and transparency, this overtly heavy-handed approach could lead to a further shortage of experienced individuals taking up the NED mantle.

A sentiment shared by the Institute of Directors (IoD), which has branded the new proposals as unrealistic and unhelpful.

Dr Roger Barker, IoD director of corporate governance and professional standards, said: “The basis behind the joint consultation by the FCA and PRA, on revising their approach to non-executive directors, is both unrealistic and unhelpful.

“Whilst we accept that criminal liability should exist for chief executives and senior executive directors who have personally taken reckless decisions, we do have severe reservations about bringing senior non-executive directors into the ambit of criminal liability.

“A non-executive director does not have access to the same level of information as an executive director, and does not have the same individual decision-making powers.”

Guildford – and indeed Surrey – has a huge pool of exceptional senior businesspeople who have much to offer large and small established and growing businesses. But they’re busy people who have few windows in their diary, and if the role of the NED becomes too onerous, it will disappear from their schedule all together which could have a significant long-term impact on the region’s economy.

So, by all means regulate, but don’t rigidly restrict and in turn throw the baby out with the bathwater.

Claire Dee runs her own communications consultancy near Guildford, and is an active member of the local business community including sitting on the Surrey Chambers of Commerce Council and the Institute of Directors Surrey Committee. To learn more visit www.clairedeecommunications.com

Responses to Claire’s Column – NEDs: Don’t Throw The Baby Out With The Bathwater

Jim Allen Reply

February 26, 2015 at 10:09 am

Responsibility goes with the job.

Aircraft technicians: if they get it wrong and cause a crash they are criminally responsible for their actions, or at least they used to be!

Why should directors of companies cashing in on their ‘connections’ simply walk away from their responsibilities – ‘not me gov!’ is all too easy to say.

We see massive bonuses given to directors even when the company makes a loss. This is totally unjustifiable. A loss means the company has ‘got it wrong’ and where does that responsibility lie? with the labourer simply being told to dig a hole in the wrong place or the boss who gave him the instruction?

It is time the bosses of this country took responsibility for their actions. Not getting enough details to make a rational decision, then ask for more details, don’t make a decision, then claim you didn’t know the truth, you were misled – that’s what you large payments are for.

I think Stephen Fry quoted that over 50% of directors had no effect on their companies’ profitability, yet took more than 50% of the money.

How can a director take £2 million out of a bank when it has losses of over £2 billion. How can the same bank have a bonus pot of £450 million – the losses would only be £1.5 million if they stopped the bonus which had clearly not been achieved.
Claire Dee Reply

March 5, 2015 at 2:48 pm

Thanks for your comments Jim – I’m all in favour of a healthy debate!

I agree re responsibility and my article fully supports accountability, but it also suggests NEDs are not treated in exactly the same way as full board member directors given they do not have access to the same level of information and are not part of the final decision-making process.