Research shows increased role for NEDs

Almost half of NEDs surveyed said that the role had become ‘more onerous and more taxing’ due to implications outlined in the Turnbull report, according to research conducted by professional services firm PricewaterhouseCoopers.

The Turnbull report published in 1999 aims to provide guidance on requirements contained in the Combined Code, which sets out rules on internal control and risk management.

The study revealed that a NED’s workload has increased significantly over the past three to five years.

‘We are now being required to delve into matters of financial controls and procedures,’ criticised one NED.

A majority of interviewees agreed there was growing tension between the two aspects of the role – monitoring and strategic.

Specific criticism centred on an over-emphasis on ‘monitoring and policing’ to the detriment of their strategic contributions to a company.

Harsher critics said the balance of responsibilities was out of kilter because of a bureaucratic misconception that a NED’s role should focus on ‘taking care of what executives could not do’, instead of getting value for shareholders.

Interviewees viewed corporate governance issues as a lesser priority to business development matters, which they said were ‘close to their heart’.

In contrast, the report also highlighted a consultation document issued by the Company Law Review Steering Group, which suggested NEDs were paying too little attention to their monitoring role.

A further concern was raised over the size of non-executive boards. The average size is currently 10, but corporate governance requirements are forcing an increase leading to doubts about the ability of board to reach consensusIt was also revealed that besides an induction course, little formal training is provided for new NEDs.

The average working days of a NED is just under 16 days a year for those that chair at least one board committee, and 13 for others.


More on the PwC report

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