The Role of Non-Executive Directors in Government – Report Summary

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

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Non-executive board members (NEBMs), also known as non-executive directors (NEDs), have existed in their current form in UK Government departments since 2010. They exist to provide advice and challenge to Secretary of State-chaired departmental boards on issues such as strategy, performance, and the deliverability of policies. They were introduced to bring experience from large and complex organisations outside Government, primarily the commercial private sector, to departments. We commend the number of highly experienced individuals that have taken on these positions, the time they have devoted to these roles, and the range of work they have contributed to while in Government. However, despite influencing Government business for over a decade, little is known about their roles and impact, and there is little regulation on how they are appointed. We launched this inquiry to provide some much-needed transparency on their roles and responsibilities. The evidence suggests that many NEDs have added value to departments in several ways, but their use is somewhat ad hoc across Government. Our conclusions and recommendations focus on simple ways to improve consistency, accountability, and effectiveness of NEDs in Government, as well as increase transparency to provide public assurance.

The inquiry coincided with the role of NEDs currently being reviewed by the Rt. Hon. Lord Maude of Horsham, as part of the broader Review of Civil Service Governance and Accountability commissioned by the Government. Therefore, we recommend that our findings are taken into consideration in the final report for that Review and that the Government should prioritise its publication by mid-July 2023. The inquiry also follows growing concerns over the politicisation of NED roles, and we highlight several examples of appointees with seemingly political or personal connections to the Government. We conclude that NEDs should continue to bring genuine outside experience to Government and there should be a clear separation between the role of political or personal advisers and that of objective non-executive board members. We also conclude that how boards and NEDs are used in departments is too variable and dependent on the relevant Secretary of State. We recommend that Secretaries of State should undertake mandatory training on their role in chairing quarterly board meetings and working effectively with NEDs.

The roles of non- executive board members and lead non-executive board members are broadly defined in the Corporate Governance Code for Central Government Departments and the accompanying Guidance Note. However, we found that NEDs often hold significantly more responsibilities within their departments outside the board than is publicly documented or defined. This is problematic, as it hinders the transparency, consistency, and accountability of their positions. We recommend that the Corporate Governance Code should be updated or replaced by the end of the calendar year and should:

  • reinstate the “independence” of NEDs;
  • encompass the work of NEDs in Government, both on and outside the departmental board, including any limitations to that;
  • include a consistent policy to link the number of NEDs in a department to its size and remit;
  • include a standard set of skills and qualities to undertake the role of a departmental NED or Lead NED, rather than express a preference for individuals from specific sectors;
  • outline the expectation that Secretaries of State should avoid appointing individuals with clear political or personal connections, including former or current Special Advisers, serving Members of Parliament or Peers, to NED roles;
  • set the expectation that Ministers should avoid replacing all departmental NEDs on appointment in order to support transitions between Secretaries of State or administrations, or, at the very least, require departments to justify such decisions in their departmental annual reports.

The Government Lead Non-Executive Annual Report, and each department’s annual report and accounts, are the main public-facing accounts of NEDs and their work. However, at present, these documents are published too infrequently to provide meaningful transparency. We recommend a range of easily implementable ways the Government can improve this, including publishing the following information on GOV.UK:

  • terms of reference for each departmental board with the individual responsibilities of each non-executive board member;
  • board minutes after each departmental board meeting;
  • news stories after each NED appointment, detailing the recruitment process and their suitability for the role;
  • departments’ registers of board members’ interests in a consistent format, including non-financial interests, every six months; and
  • an updated full list of NEDs, with their year of appointment, at least annually.

We also recommend that the Government Lead Non-Executive Annual Report is published within four months of the reporting year ending at the end of March. Departments should also list specific actions being taken forward as a result of board effectiveness evaluations in their annual reports.

The Corporate Governance Code stipulates that non-executive board members should be appointed on merit through a fair and open recruitment process, but the evidence to our inquiry demonstrates there are a number of exceptions to this. We also found that departments are not consistently providing information in the public domain about the process for appointing NEDs, nor abiding by the requirement to justify departures from the Code in departments’ annual report and accounts. We recommend that the Government Lead Non-Executive should monitor and report on compliance with the Corporate Governance Code, broken down by department, in the Government Lead Non-Executive Annual Report. This would cover all aspects of the Code, such as attendance at board meetings, whether fair and open recruitment practices have been followed, the management of conflicts of interest, and whether board effectiveness evaluations have been carried out.

We agree with the Committee on Standards in Public Life that NED appointments should be regulated by the Commissioner for Public Appointments. We request that a timeline for implementing this recommendation in full is provided in the Government’s response to this Report. We also recommend that the position of Government Lead Non-Executive should be classed as a “significant appointment” under the Governance Code on Public Appointments. Finally, we recommend that in the future the Government’s preferred candidate for the role of Government Lead Non-Executive should be subject to a pre-appointment hearing before this Committee, and that the Lead NED should appear before this Committee to discuss the content of their Annual Report.