94.Since the 1990s, government departments have had departmental boards that have included independent or non-executive members. These boards were first formally codified in 2005 and were typically chaired by permanent secretaries with non-executive members of the boards (non-executives) appointed by them. However, practice differed between various departments and agencies.
95.The Coalition Government enhanced the role of non-executives, placing a greater emphasis on their having commercial experience—the 2010 Ministerial Code was changed to stipulate that they should be “largely drawn from the commercial private sector”. Measures were introduced to standardise the role of departmental boards. The key components of this were:
Where permanent secretaries had been largely responsible for appointing the non-executives, this became the responsibility of the secretary of state.
96.The aim of these enhanced boards was to introduce best practice from the private sector in specific areas relating to operations rather than policy.Non-executives would provide scrutiny of, and advice on, progress towards fulfilling departmental goals.
97.Each departmental board is chaired by the secretary of state, and comprises equal numbers of ministers, officials and non-executive board members. Although the official guidance suggests that departmental boards provide “strategic leadership”, in reality, their role is advisory.
98.Beyond their board membership, non-executives also often take on extra roles both within departments and also across government. In his 2016–17 annual report, Sir Ian Cheshire, the current Government lead non-executive highlighted some examples:
99.Each departmental board has a lead non-executive board member, who has additional responsibilities in supporting the secretary of state in his or her role as chair of the board. Departmental lead non-executives should meet regularly with other non-executive board members to ensure their views are understood and that the secretary of state is made aware of any concerns and they should also liaise with the Government Lead Non-Executive. The Prime Minister is responsible for appointing the Government Lead Non-Executive. The Government Lead Non-Executive meets regularly with departmental lead non-executives and feeds their views back to the Prime Minister and Cabinet Office. The Government’s lead non-executive, Sir Ian Cheshire, described his role thus:
My role, as lead of the network of over 80 non-executives, is to ensure we continue to offer stability and useful advice and challenge to departments at this time of national change.
100.The Government Lead Non-Executive also reports to Parliament through an annual report to this Committee. This report should include the key concerns of the non-executive board member network and provide feedback on policy implementation. It also collates examples of best practice in the work of boards and non-executive board members.
101.The emphasis given to boards varies between departments. There is, for example, a significant variation in the number of times boards meet. They are expected to meet a minimum of four times a year and though most met that threshold, a substantial minority did not.
102.Overall attendance at board meetings was 81% but it varied across different categories of attendees.
103.The evidence we received suggested that, currently, boards are not effective. Professor Kakabadse said that “Except in a few cases, the emergent view is that boards deliver little value”. Professor Hazell, UCL, agreed, saying “Few Whitehall boards are said to be working well”, whilst the BGI said that there is “little evidence that Departmental Boards generally are fulfilling the prospectus offered at the time of their reform under the coalition government”.
104.Professor Kakabadse blamed the poor chairing skills that ministers generally had for boards’ underperformance. His research found that:
The quality of chairmanship is reported as varying substantially. Certain NEDs report that they have hardly met their Secretary of State. Others state that the Secretary of State pursues their political agenda and attends less to the board oversight, advisory or support function. Equally the comment was offered that certain Secretaries of State do not seem interested in the work and contribution of the departmental board.
105.Professor Kakabadse’s response to this tendency for secretaries of state to make poor chairs was to recommend that they should relinquish their chairing role:
in the few cases where an independent, external chair has been appointed, those boards are reported as providing effective oversight and making a valued contribution.
106.Much of the evidence we received on this matter agreed that the role of the secretary of state was crucial in determining how well the board functioned. Where a secretary of state chaired the board badly or did not give adequate priority to their role as chair, board effectiveness suffered as a consequence. The BGI said that “The success of this form of governance depends upon the interest and involvement of individual Secretaries of State and the evidence is that this has been patchy”.
107.However, concern was expressed that removing the secretary of state from the chair would damage boards further. If the level of engagement of the secretary of state was the main factor in determining whether a board was effective, removing responsibility for chairing was likely to reduce that engagement.
108.Lord Maude, who, as Cabinet Office Minister, was responsible for the change of board structure, said “Realistically, Ministers in charge of a department are not going to show up and sit through a meeting where they are just a member of the board”. By contrast, “requiring the Secretary of State to chair it is a good obligation to put on the Secretary of State and means that he or she has to get under the skin of the operational activity in the Department”. Sir Ian Cheshire was similarly sceptical: “If you remove the Secretary of State from the board, the relevance of that board changes”. The Minister agreed that secretaries of state should remain as engaged as possible and so should retain the chair. Professor Hazell agreed that secretaries of state often proved poor chairs but the solution did not lie in removing them from the chair:
Boards only work well when the Secretary of State takes them seriously, which not enough do. But there was no wish to revert to the pre-2010 model: it was felt NEDs would be taken less seriously by the department if not part of a board chaired by the Secretary of State.
109.Professor Hazell suggested that secretaries of state should consider allowing the department’s lead non-executive to chair those parts of board meetings which involved close scrutiny of department’s performance or plans.
110.It is clear that, currently, boards are not regarded as effective in many instances. That several departmental boards did not even meet the minimum threshold of four meetings a year is symptomatic of this. We agree that this is in large part due to the role of the secretary of state as chair: where secretaries of state do not take boards, or their role as chair, seriously, they deliver little value. We do not, however, subscribe to the view that the secretary of state should relinquish the chair. Instead, measures to establish a clearer role and expectations of departmental boards, including of the role of chair, should be introduced.
112.The role of the board and of board members should be included in any induction for ministers new to a department. New ministers should establish with the permanent secretary and the lead non-executive clear goals against which board performance can be evaluated. Secretaries of state should, on a comply-or-explain basis, relinquish the chair for those parts of board meetings involving evaluation of the department’s plans or performance.
113.Although boards are not generally considered to be operating effectively, there was a greater satisfaction with the role of non-executives themselves and the wider role they played. The calibre of those appointed as non-executives was noted. Professor Kakabadse said that:
NEDs as individuals received high praise from Secretaries of State, the Permanent Secretaries and civil servants lower down the hierarchy. Their experience, facilitative skills and independence, and willingness to offer constructive challenges are viewed as invaluable. Most acknowledge that the NEDs on departmental boards are of a high calibre.
114.It was noted that where non-executives added value to the department, it was largely outside their formal roles on the main departmental board. The external expertise they bring to roles on Audit and Risk Committees or to nomination or remuneration committees has been noted. Non-executives also work with their counterparts in other departments to provide a degree of cross-government working, learning and promoting best practice. Departments ask non-executives to take on roles outside boards on the basis of departmental need and their prior experience. Catherine Brown, a non-executive at the Cabinet Office, outlined the quite extensive variety of roles she currently performs:
In the development of the Single Departmental Plan what I will do is engage with the team developing that very early on to provide advice on how to think through its structure, how to ensure that all major areas that need to be covered are covered, whether they have thought about ensuring that the money lines up with the plan, and whether they have thought sufficiently about the organisation and its resources, to challenge the work in progress before it gets to a board situation. Alongside that, one of the activities that I undertake is that as part of a talent action group of cross-governmental non-executives, we review matters such as the Civil Service Leadership Academy’s proposed curriculum. We gave input to that. I was also in a group that oversaw the development of the new code of governance that has been introduced for the relationship between arm’s-length bodies and their departments, and alongside that I will assist with the recruitment of Directors General or other non-executives. There is quite a wide range of activities where I think there is a combination of me being able to add value given the professional experience I have, and some need or desire in the Department to bring in an additional perspective.
115.Our predecessor Committee noted that ministers and, in particular, senior officials, have found non-executives a valuable source of advice and mentoring. As outside experts, it was also suggested that they can be better placed to offer candid advice or critical challenge to ministers than civil servants might be: “One of the advantages the non-execs have is that we are not trying to get into the political space or get promoted in the Civil Service. We have an independence of view that I think makes it easier to have some of those challenges”. Their practical experience can add weight to advice given to a minister, relative to that given by officials. However, in some cases, it seems that, despite this, non-executives can be reluctant to challenge secretaries of state. This was particularly the case with priorities and the constraints of departmental capacity.
116.The role of board members is to “give advice and support on the operational implications and effectiveness of policy proposals, focusing on getting policy translated into results”. Policy itself is explicitly outside the remit of non-executives and “will be decided by Ministers alone, with advice from officials”. Whilst Sir Ian Cheshire was comfortable with this division of labour—he said non-executives “are not there as policy advisers, and we should not be”—there was some sense that it creates a slightly artificial distinction between policy design and delivery and that can exacerbate an existing tendency to regard considerations of delivery issues as a later “add on” to policy design rather than integral to it. Whilst there is no sense that non-executives feel they should be driving policy formulation, Professor Hazell’s team found that some non-executives felt constrained by what they saw as flaws in policy conception at an early enough stage:
Policy formulated without a hard-headed appreciation of how to deliver it will be flawed policy. And the idea that independent, rigorous and expert policy challenge by NEDs is somehow inappropriate may help explain why so many projects which looked good in theory have disappointed their framers in practice.
117.Sir Ian Cheshire acknowledged the balance inherent in advising on delivery without encroaching on policy.
I think we do approach that quite carefully in the sense of saying that we understand what the policy initiative is aiming to achieve, and our focus is on how well you land that and deliver it.
He went onto suggest that it was the policy intent and general design that non-executives were excluded from but that they might be involved in the finer details of policy design.
118.Non-executives are recruited as a source of expertise and advice. It is right that they should not be involved in the inception of policy in broad terms. It is for the government to decide on policy goals and to be held accountable for them. However, if this is interpreted to preclude non-executives from being used to full value then it is self-defeating.
120.We acknowledge that the lack of a clearly defined role for non-executives outside their formal role on departmental boards allows them to be used flexibly. However, if non-executives are typically providing most of their value, and spending most of their time, on other areas, clearer acknowledgement of that should be included in the Corporate Governance Code, including a clearer statement of the limits to their activity.
157 Non-Executive Members of the Boards are sometimes referred to as Non-Executive Directors or “NEDs” though it has been stressed that they are not Directors and their roles are not analogous with members of corporate boards (see Q336 (Sir Ian Cheshire)).
158 Cabinet Office 2018 para 3.5. See also Cabinet Office and HM Treasury 2011.
159 Cabinet Office and HM Treasury 2011
160 Cabinet Office 19 February 2013
161 Cabinet Office and HM Treasury 2017 p.5
162 Cabinet Office 15 November 2017 p.9
163 See Cabinet Office and HM Treasury 2017 p.6–7
164 Cabinet Office 15 November 2017 p.3
165 Cabinet Office and HM Treasury 2017 p.7
166 , p.47
167 , p.2; para. 28
169 , p34
170 , para. 28
174 Qq612–3 (Oliver Dowden MP)
176 , p.5
177 , p.35
178 Robert Hazell et al Constitution Unit 2018 para. 4.40. 4.47
179 Cabinet Office 15 November 2017 p.22–7
181 Public Administration Select Committee Eighth Report of Session 2013–14 HC 74 para. 104
182 Q351 (Sir Ian Cheshire)
183 Q305 (Julian McCrae)
184 Robert Hazell et al Constitution Unit 2018 para. 4.40
185 Robert Hazell et al Constitution Unit 2018 para. 5.74
186 Cabinet Office 19 February 2013
188 Robert Hazell et al Constitution Unit 2018 paras 4.43–4.44
Published: 18 June 2018