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Lack of transparency on non-executive directors in Government, say MPs

20 June 2023

In a new report, the Public Administration and Constitutional Affairs Committee highlights a lack of transparency on the appointment and activities of non-executive directors in Government.

It concludes that the Corporate Governance Code, which outlines the role of non-executives, is “not fit for purpose” and should be updated or replaced by the end of the year.

Non-executive directors are appointed from outside Government by Secretaries of State to departmental boards to provide “influence and advice, supporting as well as challenging the executive”. The Committee is concerned by “the lack of consistency, accountability, and transparency” surrounding how NEDs are recruited. Whilst the Code says that board members should be appointed on merit and through a fair and open process, evidence to the Committee’s inquiry suggested this was not always the case. Non-executive appointments should be regulated by the Commissioner for Public Appointments.

The report highlights a “small minority” of appointees that appear to have been recruited from within Government or through personal connections. The Committee “remains concerned” by the impact this may have on the ability for non-executives to provide effective challenge to Ministers and departmental boards, and the perception of such appointments on the public's confidence in non-executives.

Changes to the Corporate Governance Code should include reinstating the “independence” of non-executives and explicitly referencing that Secretaries of State should avoid appointing those with “clear political or personal connections”, such as former or current Special Advisers, serving MPs or Peers, or replacing all departmental non-executives on becoming a Minister.

The Committee finds that non-executive directors often “wield significantly more responsibilities” within their department and outside of the board than is publicly documented or defined. It calls this “problematic” and asks for the Code to be updated with their roles.

Board effectiveness and how non-executives are used in departments is “too variable” and “highly dependent” on the relevant Secretary of State. MPs call for the Government Lead Non-Executive to act as a de facto regulator of the non-executive director system, and monitor and report on compliance with the Code.

The Committee concludes that currently information concerning the work of non-executives is published “too infrequently to provide meaningful transparency”. In addition to this, the Committee recommends further transparency measures including the online publication board meeting minutes and board members’ registered interests.

Chair comment

PACAC Chair William Wragg said:

“Non-executive directors often bring valuable outside experience into Government. However, not enough is known about who they are, what they do, or how they are recruited. This risks damaging public confidence in non-executives and undermining their potential contribution.

“We strongly believe there should be a clearer separation between the role of political or personal adviser and that of objective non-executive board members. The recruitment and appointment of non-executives should follow a fair and open process and have independent oversight.

“The Government must also bring some light to the activities and effectiveness of non-executives. We found that their responsibilities can be significantly greater in scope than publicly advertised and vary between Departments.

“We would like to see the Government Lead Non-Executive become the de facto regulator to bring much needed consistency and accountability to the role across Government.”

Key recommendations to Government

  • Update or replace the Corporate Governance Code by the end of 2023 as it is not fit-for purpose.

  • Outline that Ministers should avoid appointing individuals with clear political or personal connections.

  • Outline that Ministers should avoid replacing all departmental non-executives on appointment.

  • Government Lead Non-Executive Director should act as the de facto regulator, and monitor and report on compliance with the Code.

  • Publish on GOV.UK the terms of reference for each departmental board with individual responsibilities of each non-executive board member, board minutes, and registers of interests.

  • Lord Maude of Horsham should consider this report in their final report of the Review of Governance and Accountability.

  • The Cabinet Office should confirm a timeline for implementing the Committee for Standards in Public Life’s recommendation for the Commissioner for Public Appointments to regulate non-executive appointments.

  • Future candidates for the role of Government Lead Non-Executive to be subject to a pre-appointment hearing by the Committee.

Further information

Image credit: Tyler Allicock/UK Parliament