Non-execs admit to knowledge gaps

Link: NEDs threaten extra regulation burden

The non-executive directors said they felt exposed because they could not identify ‘early warning signals’ of failing businesses, deriving from non-financial indicators, such as market, environmental, political and employment issues.

‘Non-executive directors have been largely left on their own to keep pace with changing regulation related to auditing, accounting and legal issues, as well as topping up their knowledge and skills in other areas,’ explained Michael Hughes, chairman of assurance at KPMG.

Hughes argued the NEDs are ‘vitally important’ to the running of public interest companies, and should receive the training and support to enable them to do their jobs well.

‘This is particularly true in the current environment, when the spotlight is on all aspects of governance and reporting, including the role of the non-executives. Regular appraisal would also help identify knowledge gaps and increase shareholder confidence,’ he added.

Forty percent of NEDs believe they have insufficient knowledge of non-financial indicators such as market, environmental, political and employment issues, while four in five said they wanted training on these ‘early warning’ indicators and on crisis management.

Two-thirds of respondents recognised the benefit of formal appraisal for themselves, while some 95% believe that formal appraisal of the CEO and their executive colleagues would be beneficial.

The research was carried out in the early autumn among FTSE 350 non-executive directors, and received 160 responses.

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