HoC 85mm(Green).tif


Public Administration and Constitutional Affairs Committee 

Oral evidence: The Role of Non-Executive Directors in Government, HC 318

Tuesday 19 July 2022

Ordered by the House of Commons to be published on 19 July 2022.

Watch the meeting 

Members present: Mr William Wragg (Chair); Mr David Jones; Tom Randall; Lloyd Russell-Moyle; Karin Smyth; Beth Winter.

Questions 1 - 43


I: Dr Matthew Gill, Programme Director, Institute for Government; Alan Cogbill, former Senior Research Associate, Constitution Unit, University College London; and Martin Wheatley, Research Director, Commission for Smart Government.

Written evidence from witnesses:

Alan Cogbill

Examination of witnesses

Witnesses: Dr Matthew Gill, Alan Cogbill and Martin Wheatley.

Q1                Chair: Good morning and welcome to the Public Administration and Constitutional Affairs Committee. Today the Committee is holding its first evidence session in our inquiry into the role of non-executive directors in Government. This inquiry seeks to provide transparency on an important but understudied aspect of UK Government governance structures and we look forward to hearing what our witnesses this morning have to say on the issue. I invite them to introduce themselves for the record.

Alan Cogbill: I am Alan Cogbill. After retiring from the Civil Service, I worked as a senior research associate at the UCL Constitution Unit and was one of the team who produced a report on non-executives on Whitehall boards five years ago.

Martin Wheatley: I am Martin Wheatley, research fellow, a governor and former research director at the Commission for Smart Government, in which capacity I authored a paper on departmental boards that was published last summer.

Dr Gill: I am Programme Director at the Institute for Government and wrote a paper on the appointment and conduct of departmental NEDs for the institute last year with two co-authors.

Q2                Chair: Thank you. I will begin with a question to Mr Cogbill. How would you best describe how non-executive directors exercise their roles to influence, advise and challenge Ministers and Government policy through their membership of departmental boards?

Alan Cogbill: You asked specifically about in the boards. We have abundant evidence that non-executives contributed valuably to a host of activities, many varied activities, different in different Departments. They acted, in effect, as high quality in-house consultants or trouble-shooters, occasionally at the request of the Minister, more usually at the request of the Permanent Secretary, and being members of the board probably gave strength and weight to those activities.

When you look at the question of the board itself and governance and at the rather radical, in some ways countercultural, recommendations and proposals that Francis Maude expressed in the Cabinet Office Code, it is a more mixed picture. We found that there was a handful of departments, but only a handful, where the board seemed, in its full membership including the non-executives, to be making some of the big strategic decisions, to be considering risk management, looking at performance and so on. If the board was working well, the non-executives were able to contribute in that, as I think was envisaged.

Unfortunately, in a great majority of Departments the board was not working well. Research on private company boards suggest that the same is true there, that most boards are not particularly good. The key critical factor determining whether the board was doing well or not and meeting the code expectations was, candidly, the performance of the board chair, the Secretary of State. I think that it was quite a new role for many of them and there are questions about capacity, capability, support and incentive to act as you would expect a board chair to in performance, strategic choice and delivery.

Q3                Chair: Are you saying that the performance of non-executive directors was dependent upon the ability of the Secretary of State to chair the board adequately?

Alan Cogbill: It depended how purposefully and effectively the Secretary of State was able and ready and inclined to use the board, including the non-executives. If the board was not working well, the capacity of the non-executives was correspondingly constrained.

Q4                Chair: Thank you very much. I will go to Martin Wheatley and then to Dr Gill. How closely do the roles of the current non-executive directors resemble those envisaged in 2010? If they differ, why is that so?

Martin Wheatley: I think that part of the difficulty here is that the description published in 2010 and subsequently is so long and complicated and unclear. When I was doing the work last year, a lot of the feedback was that when people are appointed to this role they don’t really understand what it is about. My view is that in place of the rather lengthy code, you need something much shorter and clearer, directing that the work of the board is, first, about strategy and, secondly, about holding the Department to account for delivery. Then it gives non-executives much clearer specific responsibilities for the soundness of outcome delivery plans for projects and programme portfolios, for people management in the Department and also for being able to work with Ministers and civil servants on the translation of policy into departmental strategy and effective delivery.

Q5                Chair: Dr Gill, do you have anything to add to that?

Dr Gill: A lot of the thrust from Francis Maude’s reforms following 2010 was to try to bring commercial expertise on to the boards, and that has succeeded. When we did our research in 2021 we found that over 80% of people on those boards had what we deemed to be significant commercial experience compared with 40%-odd from a study a decade earlier. That seems to have worked. The nature of the role performed, though, can be quite variable between Departments and that is because of the level of discretion with the Secretary of State in how the board is chaired and run and who is recruited on to it. A lot of boards have developed in the way envisaged in 2010 but not all boards.

The flipside to that, which has come out consistently in what we have read and people we have spoken to, is that it is important that the Secretary of State is engaged and interested in what the board is doing. The solution to the variability in board performance is not to take the Secretary of State out of it because they will potentially then lose interest in what the board is doing and the board will become marginal. By definition, these things are advisory and, therefore, the Secretary of State needs to be engaged.

Q6                Chair: Building particularly on Mr Cogbill’s opening remarks, Mr Wheatley, the Ministerial Code states that the remit of the departmental board should be related to performance, delivery and strategic leadership. How effective, broadly, are boards in fulfilling those functions?

Martin Wheatley: We see from evidence from Mr Cogbill’s study and other evidence that we have had that this is a very variable picture. At one end of the spectrum there is a lot of good reports of the MoD board, despite its formally advisory position, in practice functioning in ways that many of us would see resembling better corporate boards elsewhere. It is a real place where the big stuff in the Department is discussed and even, according to one account, generates a certain amount of healthy fear in the Department that when issues are brought into the board you need to take it seriously. Elsewhere, we have reports of board meetings lasting three-quarters of an hour, of Secretaries of State not turning up.

At the risk of being a broken record with my colleagues, I think the key factor here is the commitment and the confidence of the Secretary of State in leading and chairing the board. A couple of suggestions that were made in the Commission for Smart Government’s wider work are that Ministers need much more training and preparation for the corporate aspects of leading a large organisation, a Government Department. That includes how to work effectively in the departmental board.

We suggested in our paper that taking the deliverables stated in a rather shorter cross-government definition of what the board is for, the lead NED, the Secretary of State and the Permanent Secretary should agree together a set of operating rules for the board that takes account of the business of the Department, the personal chemistry and personal interests of the different players, to set out how for the time being a particular departmental board will work. That should be published and then departmental Select Committees and others could start to hold Secretaries of State to account for the effectiveness of the leadership of the board, including how they define the role of NEDs and give NEDs space to be effective in their role.

Q7                Chair: Clearly there is quite a narrow description in the Ministerial Code for judging performance, delivery and leadership. In your experience and observation, is there, or indeed should there be, the remit to discuss and challenge policy?

Martin Wheatley: We suggested that the way policy appears to be walled off from the departmental boards and, therefore, from the influence of NEDs is unhelpful. Clearly no one wants NEDs, particularly those who have no background in detailed policy development, to be crawling over lots and lots of detailed policy issues in the Department, but particularly the policy that is embodied in the three or four priorities that are the backbone of the outcome delivery plan. We did not see it as sensible to stop the departmental board discussing, as I said earlier, the translation of intent into policy objectives and specifics and then on into deliverables.

Some experienced NEDs commented to us that they felt that as leaders in very large organisations they were very used to doing what in the corporate world would be called strategythat is defining the goals of the organisation and looking at how money and people and other resources are arranged to make them happen—and that it was, frankly, perverse to stop them working with Ministers and civil servants, neither of whom in most cases have a great deal of experience in that territory, to bring about successful departmental strategy.

Dr Gill: I agree with what Martin has just said, but we take a slightly different perspective on the current guidance and why it is there. Currently the expectation is that departmental boards would not decide policy. They might participate in advising on the operation implications and effectiveness of policy proposals, so, they are evaluating policy as it goes through but the decision on policy is for the Minister, advised by the Civil Service.

I think that you have a delicate balance there and it runs to what the boards are for. If the boards are there to bring external commercial and specialist experience to bear to provide an independent scrutiny function for the Department, it is important that they are at some remove from the day-to-day policy-making discussions that Ministers and special advisers are engaged in so that they can provide some independent challenge and a different perspective on that. If the way people are recruited on to those boards and the expectation of them is that they are amplifying the policy development resource, they will not be able to provide that independent challenge.

Our suggestion is that if there is a need for that, there may be other ways of bringing that expertise into the mix but the departmental board performs an important function of independent scrutiny and that needs to be preserved. That is not to say they have to be kept rigidly separate from the policy discussions but they have a very distinct role in it from the policy adviser and the Minister.

Alan Cogbill: May I add briefly to that? I think much depends on the stage of policy deliberation and making that you are talking about. It seems to me that a Minister would do well to have advice at the point of choosing the strategic levers that will be used. That would be at an early stage. I think if you confine the board to the late stage where the policy is fully baked, that diminishes their value quite considerably.

Q8                Karin Smyth: We have started to touch on this but we are interested about the activities outside the boardroom. Mr Cogbill, there is little transparency about what non-executive directors do in Departments outside that formal role. How would you describe the common activities of a non-executive director?

Alan Cogbill: They are quite varied. It depends on the Department, as you would expect. In some cases they have led a project, which might be to advise on how the Department should organise to deliver a particular policy or operation that is needed. They might keep an eye on some of the major projects, which is a problem sometimes, as you know. They play quite a key role in the people issues, in talent management and they can be valuable in mentoring key officials. There is a whole range of things of that kind.

When you talk about the transparency of this, I think a lot of it is serendipitous at the moment and that seems to me to be a bit of a disadvantage.

Q9                Karin Smyth: Should it be defined more clearly?

Alan Cogbill: Picking up on the point that was made earlier, it would be really useful if at an early stage, and whenever there was a change of personnel and repeatedly to refresh, the Secretary of State, the Permanent Secretary and the lead non-executive were to discuss what are the priorities. The non-executive capacity is quite precious. You want to make sure it is applied to best effect and I think it would be enormously helpful if they did that, if they wrote it down and it was transparent.

Karin Smyth: Yes, if it was transparent.

Alan Cogbill: That would keep people honest to the expectation at the start.

Q10            Karin Smyth: You alluded to problems. Do you think that transparency and more codifying of the external role would avoid those problems?

Alan Cogbill: When you say “codifying” I react a little bit negatively. I think that it is important in these matters, as it would be in any company or charity, to have some flexibility about making best use of available resource against judgment of the priority areas for attention. I would not expect it to be prescribed and I certainly would not want to see the unwitting effect of codification to be to restrict some of those very valuable and valued activities that are going on at the moment. But certainly introducing what you might call ordinary management discipline into something like a job description of objectives, basically, and then that was available, if that was shared centrally it would be valuable. Departments ought to be able to pick up ideas from other Departments. The non-executives do have certain cross-cutting responsibilities but I think that could be amplified and it would be beneficial.

Q11            Karin Smyth: Thank you. Following on from that, again for our record, if we make roles more consistent between Departments, what mechanisms exist to ensure a degree of consistency and learning across those roles? Does it really matter if the roles are varied?

Dr Gill: Departments do quite different things, obviously, so there will be quite a bit of variation in what needs to be discussed and covered on the boards, but it might help to step back and describe the structure of the guidance that exists at the moment for how boards are supposed to operate. There is a governance code for public boards, which is adhered to on a comply or explain basis. A guidance note is annexed to that. At the top of the guidance note it explicitly says, “Nobody has to stick to this guidance note”. Within the guidance note is a suggestion that boards develop a board operating framework, a BOF, and some suggestions within that as to the kinds of things that the BOF might include. There is quite a layered process of guidance nested within guidance that becomes increasingly unspecific before you get to having to set out what the board is doing and what it is for.

I think that it would be possible to shorten that chain so that much more of that is captured at the comply or explain level, potentially with templates for how boards would operate by default unless there is a reason to do differently.

Q12            Karin Smyth: So, there is no consistency. If it is,You don’t need to follow this guidance”, to paraphrase, there is no consistency across Departments.

Dr Gill: Not mandated, no. There is consistency in practice because people come from private sector boards and have an understanding of what they are trying to achieve through this, but there is a huge amount of variation. That goes all the way back to how Ministers want to use the boards and they will use them in very different ways for different kinds of scrutiny or for discussion of ideas. It is hugely varied and the Government Lead NEDs annual report has at the back of it a series of case studies from all the different Departments of the kinds of things they do and very different discussions happen on the boards.

Q13            Karin Smyth: Has consistency been tried—it is just that it has never been agreedor has it just evolved; guidance upon guidance, as you described it, has evolved into this?

Dr Gill: Yes. The guidance exists. The fact that it is very indirect does not mean that people completely ignore it and the Government Lead NED’s role is to work across the boards and to try to promote consistency in best practice. There is a network of lead non-executive directors that works across Government. They talk about activities across the different boards, things that affect Government as a whole. There is consistency and join-up and the Government Lead NED provides that, but the way in which the boards are constituted reflects the quite federal system of the UK Government where the Departments are sovereign, so there is a lot of discretion about how things operate.

Q14            Karin Smyth: Thank you. Mr Wheatley, do you want to add to that?

Martin Wheatley: I am firmly in favour of more consistency than we have at the moment in the definition of what the results of having an effective departmental board are. For example, the board should have a strong focus on the outcome delivery plan, giving the NEDs a very specific role in ensuring the quality of the outcome delivery plan and commenting in the departmental report about their findings.

Where I get a bit more queasy about the concept of consistency is when it comes to ways of doing business day to day: how you get to a solid outcome delivery plan, to use that argument, the precise sequence of discussions you go through and who is involved in what may well vary between Departments, not just because they do different things but because of the personalities and interests of different players. That is where having a Department-by-Department operating description of how the board works comes into play. The thing that would be consistent is everybody has to have this operating description that shows how they will do the limited number of things that are set in the central guidance. That is published and departmental committees and others who want to probe it can do it. I fear that if boards were given too specific an operating manual centrally that would lead to them becoming less useful because in some cases the shoe would not fit.

Alan Cogbill: I agree with that because there is the ever present risk in these systems of box-ticking and that is what will happen. You will have a checklist and it will be some junior official’s job to be able to put the right tick in enough of the boxes. I am sorry but I think that is an inherent weakness in certain kinds of organisation. The idea of defining some of the required outputs and areas of board grip is absolutely right and I think that is what is coming out there.

I will add that there are some simple mechanical things that bedevil this, the big one being time. Secretaries of State are very busy, often they are rushed from pillar to post, and what I am saying will just annoy every diary secretary in Whitehall, but you do need for whatever it is agreed to be, the four or five meetings, two hours to make a sensible go of it. It is a protected time, not between other engagements with the Minister worrying about the big speech he has to give in 10 minutes’ time. I think that some of the basics like that probably need to be pushed fairly firmly from the centre.

Q15            Karin Smyth: On that and individuals, can we pick up on whether there should be more transparency and parameters around individual responsibilities? People are sometimes recruited for specific expertise within that broad framework, so if we can go back the other way on that, should there be more parameters around it?

Alan Cogbill: We are talking about a board and I am thinking about the boards I knownot for profit chieflyand of course we have a matrix of the skills and other qualities. We want someone who preferably knows about housing or local authorities, preferably is geographically spread and such like. When you actually go to market and try to find them, you have to take the best you can and I think that we should be a bit careful of that. Yes, I think it is a very good idea that Departments should try to identify for instance if they are weak in digital and that would be helpful. That is very elementary, but I don’t think I would want them beaten up because they went to market to find someone for digital and they found someone who was very good as a board member in other fields or across the piece. I think that is the slight danger of being too prescriptive or too exacting. We should always keep in mind the question of who will want to do these jobs and will they come forward.

Martin Wheatley: I agree with that. It would be helpful, though, if in the departmental operating description of the board there was a statement about the collective responsibility of the NEDs as a group plus any individual responsibilities that had been agreed for them; for example in many cases they are chairing audit and risk committees. If it could say, “This particular NED’s responsibilities on this board are to chair audit and risk and anything else it might be, that introduces a greater degree of transparency and clarity but it does not force every single departmental board into a rigid template about how they use their non-executives generically and in specific cases.

Dr Gill: I agree with what has been said. The other thing that you can do on clarity of responsibilities is in the recruitment process, making sure that the job criteria and specification are clearly set out. If these appointments were made through a regulated process, you would be able to see that very clearly. There would be a job specification and that would be advertised. There would be an independent advisory panel that would assess the applicants’ capability to do the role based on the job criteria and then Ministers would have a choice of candidates to make at the end of that process among people, all of whom had been found appointable based on the transparent criteria for the role.

We argued in our work for the regulation of these appointments to departmental boards. If you did that it would solve a lot of these problems because it would make sure that you had very clear responsibilities set out and agreed with the Minister at the outset and you had capable people coming through and on to the shortlist at the end.

Karin Smyth: That is very helpful. Thank you.

Chair: Just bear in mind the quite poor acoustic in this room with our questions and answers, if we might.

Q16            Beth Winter: Mr Cogbill, as you are aware, the Government have committed to a complete review of the governance of the Civil Service, including the role that the NEDs play in Government. What lessons do you think could be learnt from their impact over the past decade on appropriate activities that they should undertake?

Alan Cogbill: At one level, of course, non-executives have the power to recommend the dismissal of a Permanent Secretary. In fact, I don’t think that has become an issue and nor should it, but I was talking earlier about the involvement in some of the talent management and having a different perspective sometimes on the direction of key roles. I think that is proper and useful. The issue of non-executives is, in effect, a subset of the big question about how Ministers and officials interact, in my eyes. Of course there are certain rules, certain constraints and certain expectations about how far Ministers get directly involved in some of the issues and things you are referring to. On the whole those probably need to be read across to NEDs but I would trust the Permanent Secretary to manage these things. It may sound rather weak but I think in some of these things you have to finally trust people and you can’t write it all down to ensure the result you want that way.

Q17            Beth Winter: Thank you. Mr Wheatley, you have mentioned already NEDs’ involvement in the Departments’ outcome delivery plans and the Declaration on Government Reform includes a role for them in monitoring the performance of those. How should this differ from their previous involvement in the scrutiny of single departmental plans?

Martin Wheatley: One thing we picked up when we did our research was a feeling by some NEDs that they were not sufficiently allowed into the development of single departmental plans to be able to contribute effectively. They felt that this was a pity because particularly for those with senior corporate experience, strategic corporate planning is one of the fundamental things they would do as corporate executives and non-executives.

As we suggested in our paper, the thing that would create a clearer definition of what their role is on ODPs is to say that they have a specific role as NEDs in assuring the realism and quality of the planning that goes into the ODPs. In the departmental report, there should be a statement by the board NEDs about their view of the realism and credibility of the departmental plan. One would hope that if discussions have proceeded in a constructive way they would able to say they think this is a sound plan, but of course they always have the option of creating a little bit of embarrassment by making a statement that they have some concerns, just like an external auditor can in some cases make a statement of concern about something. That is how I would try to beef up their role in departmental planning.

Alan Cogbill: I agree with that very strongly.

Q18            Mr David Jones: The Corporate Governance Code provides that board members should be appointed on merit through open competition. How has that worked in the past?

Alan Cogbill: It has been variable, I think it is fair to say. I recall occasional instances of an appointment made without very much surrounding process of any kind. That is the exception. We found that of course approaches were made to candidates, just like any other sector at this level, sometimes through the Department, sometimes through head hunters or whatever. The majority of appointments had followed a regular process, some sort of panel interview and some sort of specification, but as Matthew has highlighted, absent regulation by the Public Appointments Commissioner, there is no enforcement or oversight of those practices. I think it would be helpful if there were and that would build confidence.

The other issue is quite tricky because by the same token the appointment is in the hands of the Secretary of State, so is termination. There have been some instances where non-executives seem to have been removed from boards not for any personal failing. I am thinking of Michael Gove at the Ministry of Justice where he just decided he didn’t want the four who had served the predecessors perfectly well by all accounts. He wanted Theodore Agnew and so appointed him. I think that raises some questions. I know that Matthew has raised questions about political affiliation and whether in effect people appointed as non-executives should perhaps more properly be seen as special advisers, because special advisers might go on to win a seat or become a Minister and no one would raise an eyebrow about that. It is established progress, but I think for a non-executive it raises a few issues.

Q19            Mr David Jones: The roles are very different though, aren’t they?

Alan Cogbill: Absolutely. Well, you would think so but I think that is a bit of the question in a way.

Q20            Mr David Jones: Some Ministers are using NEDs as effectively special advisers?

Alan Cogbill: I think it would be certainly in that instance, but that was exceptional. That is not the practice but I think it is very regrettable that it happened.

Dr Gill: There have been a few instances of that and instances where people have then gone to ministerial or political roles afterwards. The question that raises is about their independence when they are in the NED role. If they are doing the NED role as part of a career path that is heading in a political direction, are they bringing the challenge that you need from the NED role specifically at that point and being sufficient independent? Also there is a question about whether the skill set of somebody who is on a more political career path is what you are trying to bring into a departmental board.

Q21            Mr David Jones: If the governance code is routinely departed from, what impact does that have on the diversity of appointments?

Dr Gill: I think it is quite hard to tell. There is quite a small sample size in the number of departmental NEDs across Government or departmental board members. With NEDs we are talking about 80 people, I think. The latest Government Lead NEDs report says the gender balance is about 60:40, but there is not much detail on other aspects of diversity. It is very difficult to drill below. With the lack of transparency around the appointment process overall, it is difficult to see under the skin of that and see what is being done about diversity or not.

Q22            Mr David Jones: This Committee was told in June by the Cabinet Secretary that Ministers were going to accept the recommendations made by the Committee on Standards in Public Life that appointment of NEDs should go through the standard public appointments process. Do you think that would make a significant difference?

Dr Gill: It would and that is exactly what I have been suggesting. We are still making the recommendation because the way that Simon Case worded it was that the Ministers were minded to do this or something, so it would be good to see that go forward. It will address some of these things, partly because the Commissioner for Public Appointments has a specific remit to look at diversity across public appointments and a programme to do that and to think about outreach to candidates and to monitor progress. It would bring departmental NEDs within the purview of that work.

Q23            Mr David Jones: What information do you think should be publicly available on the recruitment process?

Dr Gill: First is the job description, the composition of the panel making the appointment and then the decision that is made at the end of it. I think that disclosures about how long these appointments take are quite important as well and then collecting data on what the proportions are of people along various dimensions. It is important to collect conflict of interest data, for instance, and data on political affiliation and involvement, which is there to some extent already but that could be strengthened as well.

Q24            Mr David Jones: The head-hunting process that appears to be followed these days I suppose results in candidates or appointments of a certain calibre, at least in the eyes of the appointing Minister. Do you have any concerns that the proposals of the Committee on Standards in Public Life could result in a reduction in the calibre of appointees?

Dr Gill: There is a risk to it. If you are trying to appoint people for two or three days a month sometimes to sit on a board and they see, “Oh goodness, I have to go through this very cumbersome process to be appointed to that”, it could put off somebody very senior, who has a little bit of time to help out, from going through that process. That is certainly possible. In wider work on public appointments that the institute is doing, we also hear of a great many people who are put off precisely by the fact that that process is not in place and thinking that if they do not know somebody or are not part of the crowd they cannot be appointed and put themselves forward.

I think on balance having that process more transparent and laid out so that people know what they are getting into and with an objectivity to it would help rather than hinder. It will put off some people but it will encourage other people.

Mr David Jones: Thank you.

Q25            Lloyd Russell-Moyle: Dr Gill, is the process for managing conflicts of interest in non-executive director appointments adequate?

Dr Gill: There is a requirement for non-executives to declare any potential conflict of interest publicly. When we did our research last year we found that the actual publication of interests is inconsistent. The majority of Departments only published interests when there were direct economic transactions between the board member concerned and the Department. Of course, an interest can be broader than that. There can be interests that are affected by the policy decisions that the Department may make or bodies that people may be involved with in a non-financial way.

We would argue for, first, a more timely declaration of those interests. Sometimes they can be very out of date, through the annual report or even if they are online they can be many months out of date, so we could have a quarterly declaration of interests that includes direct financial connections with the Department but also things that might be seen to be potential future conflicts or non-financial conflicts.

Also it is important to be thinking proactively about how conflicts are managed. The existence of a conflict per se is not necessarily a problem if the board is thinking about how that conflict can be managed and mitigated. It is important to be able to set out in advance of that conflict arising how it will be dealt with. At the moment it is very difficult as an outsider to see the extent to which each individual Department is doing that and thinking about that. One could think of ways in which boards might try to be more transparent about how they think about those things without necessarily having to put everything out in public that they consider and then conclude there is not a problem, but more sight over what they are doing to think that through would be helpful.

Q26            Lloyd Russell-Moyle: There is no uniform or standard process adopted by Departments?

Dr Gill: Not at the moment.

Lloyd Russell-Moyle: And there is no threshold of what each Department considers an interest to be published or not?

Dr Gill: Not that I am aware of.

Q27            Lloyd Russell-Moyle: Mr Cogbill, you mentioned the political elements. Are political affiliations declared in these processes?

Alan Cogbill: I couldn’t say. You are right when you talk about thresholds and things because obviously you would not disqualify someone for being a party member—well, I say “obviously”, perhaps you would, but I don’t think I would if they seemed to fit the bill in other respects. Echoing exactly what Matthew has been saying, there is no transparency about the standard board operating procedures of declaration and knowing where the person might be tainted in their view. One hopes that that is happening, but there is no information that allows us to take confidence that it is.

Dr Gill: When we did our research we tried to dig back to everybody in post at that time and so the proposal that we came up with was that you would not want to appoint people to boards who were elected representatives with party affiliations, so MPs, councillors, devolved parliamentarians or current special advisers, for instance. If you wanted to appoint, for instance, Lords, former special advisers or significant donors, you should be required to make a public justification as to why you had done that. The disclosure of enough information to determine those facts and then to disclose against them is where I would start.

Q28            Lloyd Russell-Moyle: It has been suggested to the Committee that non-executive directors should be referred to the Advisory Committee on Business Appointments before taking roles in the private sector subsequent to appointment. Do you agree that that would be a good start?

Dr Gill: ACOBA is more about post appointment. I think that is harder and it is harder than it is for Ministers and civil servants because these are very part-time roles and so people’s main careers are already outside of being a departmental NED. I think if one wanted to do thatand I can see why there would be a concernit would be important to be very clear to people recruited on to departmental boards up front about what the implications for their other work, which is the majority of their work, would be of that process. I think that it probably would not be fair to put people through that post hoc unless they knew exactly what the parameters were going into it.

Q29            Lloyd Russell-Moyle: It is not to say that they would be rejected. It is just that they would go through a process and the threshold might be lower for them than for a Minister.

Dr Gill: Indeed, and that would need thinking about.

Q30            Lloyd Russell-Moyle: Mr Wheatley, do you want to add anything on any of that?

Martin Wheatley: I spoke earlier about having a board operating statement for each Department. A section on how operationally they were going to handle the questions of conflicts and the fact that people simultaneously or in the past or in the future have roles that people might have questions about could be included in the board operating statement. That would then be subject to scrutiny by departmental committees and others with an interest.

Q31            Lloyd Russell-Moyle: It would seem to me that a pro forma for people declaring their interests would be—my local parish councillors have to fill in a standard pro forma that is agreed by all parish councils across the country, and it is a very part-time role in a non-partisan parish. Sometimes councillors are part-time and sometimes they are not, but in a part-time role something along those lines might help move this on.

Dr Gill: I think that a lot of that is happening on boards. I am sure if we went away from this meeting and asked, “Is the departmental board asking its members what their conflict of interests are?” the answer to that would be yes. The question is how standardised that is and how public it is that that is happening.

Lloyd Russell-Moyle: Thank you.

Q32            Tom Randall: You have talked about commercial and political experience throughout your answers this morning but just to focus on that in particular: how successful do you think non-executive directors have been at bringing skills and expertise from commerce into Government?

Alan Cogbill: That is one of the areas, as it was reported to us, where they have been very useful. The Government do an awful lot of procurement, a fantastic volume of procurement. Obviously they have their own professionals in that field but it is something where a second opinion, different opinion, different experience or background is valuable. There were instances where that was demonstrably an official—having talked to several NEDs, whatever their background, I was about to say that they wouldn’t hold back. In one sense they do hold back. They tend to absorb what they see as the Whitehall culture when it comes to candour and speaking truth to power. We felt that to that extent their value might be diminished, but I think privately and through suitably discreet channels there is plenty of evidence that if they felt something was awry or was not going to produce the right results they would say so.

Martin Wheatley: Clearly people with commercial experience have a lot of scope to complement the skills of Ministers and civil servants; in addition to commercial, the formation and testing of corporate strategy, in financial resource management and in people management. We pick up from the conversations we have had, the studies that have been done and the reports of the lead NEDs that in some cases it is clear that they are making positive contributions on these matters, whether that is through what they do in formal board meetings or do outside board meetings informally, mentoring and all of that kind of thing. I think what is needed to realise that potential in full is more clarity about the role of boards, and particularly the role of NEDs on the boards, to make sure that this potential is being realised in all Departments rather than in just some and a bit ad hoc, depending on personal chemistry and the ways of working in a particular Department.

Dr Gill: I completely agree with that. The only thing I will add is that a lot of commercial experience has been brought to bear through the recruitment of these NEDs. It is important not to define that too narrowly. Commercial experience might be finance and strategy but it might also be marketing, law, sectoral experience relevant to the Department. It is possible, particularly on the sectoral side in particular Departments, to think a little more broadly about who those people might be.

Q33            Tom Randall: Building on the point that Mr Wheatley made, the Committee on Standards in Public Life identified the increasing trend among Ministers to appoint political allies as non-executive directors in Government Departments. Does this impact their ability to provide that objective scrutiny and challenge?

Dr Gill: I think yes, and I refer back to the conversation we had a few minutes ago on that. To add to those points, the risk of a political ally of the particular Minister, for instance, being present is that while in some respects that might enable free thinking between the Minister and that person, free communication, it may also lead the board member to be more acquiescent to what the Minister wants to do and the way the Minister thinks. I think it is important when you have people coming in on that basis, it is not that they are not skilled and well meaning people trying to do that job and taking that appointment when offered it; it is that they will have an unconscious bias towards the way the Minister thinks if they are a close political ally. They will not necessarily know what they don’t know or what sort of independent skills they are not bringing to the table as a result of their association. It comes back again to what is the role of the board and what kind of skills they are trying to bring on.

Q34            Tom Randall: Someone who is a political ally might, none the less, have business experience. It is not necessarily an either/or. Is that a nuance that can be managed at all?

Dr Gill: The way I would manage that is through the regulated appointments process. That process is set up precisely to try to provide a double gate on appointments, where there is an assessment panel that determines the appointability of a candidate against the job criteria. In that situation you would have assurance that this person has the relevant commercial skills to be able to do the role well. Then the shortlist is presented to the Minister for decision and the Minister may rightly pick from that shortlist the people they feel most able to work with. But how successful somebody who was a more political animal, let’s say, was at getting through that process would depend entirely on how you write the job description for that.

My view is that the job description for these boards should not be one of political adviser. It should be one of more commercially based independent analysis and scrutiny of what the Department is doing, because that is the distinct thing that these boards bring to the party, but that would then need to be instantiated in the job description.

Alan Cogbill: I very much agree with that. I was just thinking back to that in the Electoral Commission at one stage party activity was a disqualification because of boundary work and such like. Then I think following the Committee on Standards in Public Life recommendation it was allowed, indeed asked, to appoint people who had been politically active, essentially because the commission was taking on a role of regulating party finance and so on and there was an element of previous poachers turning gamekeeper. At that point the business of the Boundary Committee for England, which implemented changes in council division boundaries and such like, had to be hived off. It depends a lot what the job is.

Dr Gill: Exactly, and I think everything I have just said is with the caveat that from a conflict of interest perspective you would want, as I said earlier, to preclude sitting elected representatives and to explain why you had appointed certain other people if that was the decision.

Martin Wheatley: I agree with Dr Gill too. The only additional point I will make is that for these things to end up being managed in a way that avoids the risks of that kind of appointment, while not tying Ministers up in red tape, think about the preparation and training of people to become Secretaries of State. The commission paper suggested that people who are becoming Ministers or are tracked to becoming Ministers should receive training in proper corporate governance and how to run a board effectively.

The other thing that I think has probably snuck in here over the last few years is that Ministers desire to have policy advice that is independent of the Department and aligned to them, but the current rules around special advisers and the like create possibly excessive constraints. That is why the commission suggested that Secretaries of State should be able to appoint councils of advisersagain with suitable controls and transparency about appointment to them—so that people don’t feel they have to use the departmental board, which is a different kind of thing, as a shortcut to getting someone in the Department who they think will give them good politically aligned advice.

Q35            Tom Randall: My final question to you, Mr Wheatley, is that the Declaration on Government Reform appears to reinforce the role of NEDs in areas such as challenging departmental performance and talent development of senior civil servants. Do you think that these activities would be appropriate or remain appropriate for those with non-commercial backgrounds?

Martin Wheatley: I think people can have very good corporate planning, resource management experience from non-commercial backgrounds. That could be, for example, local government—in the better run councils there are people who in my view could teach many Government Departments lessons about good resource management—or from larger organisations in the third sector. Depending on what the business of the Department is, alongside people with commercial private sector backgrounds, it could be that people with senior level executive experience in other sectors could add value to a departmental board.

Q36            Tom Randall: Do you think that certain activities should be restricted to candidates with specific backgrounds?

Martin Wheatley: As came up earlier, I think good practice from any sector would be that whenever there is a vacancy you consider what you are looking for against some kind of description of the skills you need in the board as a whole and you set out in your job description or your advert that you are particularly interested in certain skills and experience. That will tend to skew the recruitment towards achieving that, but of course still leaving you flexibility to make an appointment that is not quite so strong in those specific areas if the candidate will otherwise bring huge strengths to the board.

Alan Cogbill: May I add to that? There is a danger of becoming too inward looking in Departments. It is picking up Martin’s point that some of the choices that have to be made are about delivery of big outcomes through the police, local authorities, the not-for-profit sector and such like. I think that one wants to encourage Departments to be thinking creatively, not simply about their own resources and possibly not even about statutory services only but about the bigger picture to get real traction on some of the hard issues. If that is the case, it seems to me that people who have perhaps been close to the action—and for goodness sake, it could be running a housing advice agency or something of that sort—have a distinct perspective, which is valuable. I think financial and commerce business is important but is very well represented at the moment, very well represented, and I think some sort of mix of background. I would not necessarily say that you have got your special area. Indeed, I would contradict the view that you have got your special area and you should keep to it because that is not really how you get value out of the board, it seems to me.

Sorry, I am picking up on the previous question on the council of advisers point. I think that there is a lurking desire on the part of Cabinet Ministers to have a cabinet. It is a parallel issue to should we have a Prime Minister’s Department and how does anyone exercise sufficient grip over a large and complex organisation. I think that is what we are slightly stubbing our toes against here, because Ministers in a sense want some different political advice from a different perspective and there may be problems about getting that through SpAds. They want perhaps different expert advice, competing views about some essentially technocratic issues, for instance. Goodness, if you get into climate change or something, where do you go on that? To an extent they just want management agents really, almost deputy Ministers who can go round and do things in greater depth than they can. I am not sure quite how you solve the issue about the sheer capacity at the top, but I think it needs to be seen in that rather broad context.

Tom Randall: Thank you.

Q37            Chair: Following on neatly from that, I have a series of questions about the future. Mr Cogbill, I think you hit on an interesting point because if non-executive directors were to be invested with greater power on boards, what implications does that have for ministerial accountability?

Alan Cogbill: That really goes to the heart of it. I think you said in passing that boards are just not the same as company boards and charity boards because the members do not carry joint and several responsibility. At the end of it, the Minister is the final authority on decision-making and carries accountability to Parliament and elsewhere. I think all of the structures that we turn our heads to need to be careful not to do violence to authority and accountability going hand in hand and not to do violence to the principle that we are a democracy and you want Ministers at the end of it to make these decisions. The question really is about providing them with it could be training, it could be a range of information and people with different experience, possibly in different roles. We are talking now about NEDs but I think that there is quite a lot of work to be done on the design of governance, if I can put it that way.

Q38            Chair: Do you have any reflections on that theme, Mr Wheatley?

Martin Wheatley: I agree.

Q39            Chair: Very concise. Dr Gill?

Dr Gill: It goes back to the way Martin was describing the MoD earlier. Assuming that is accurate, what you see there is a board that is advisory, and has to be advisory because of the chain between accounting officers and Ministers, but behaving as if it was fiduciary and had responsibilities and taking the work of that seriously. I think there is a way in which boards can behave as if they have those responsibilities and with that level of seriousness while recognising that ultimately the decision is for the Minister.

Q40            Chair: You may have touched on this, Mr Wheatley, so forgive me, but non-executive directors are involved in the annual board effectiveness review. What impact do they have?

Martin Wheatley: From outside the system, it is very hard to say. As I said earlier, one thing that you could do usefully is give the NEDs specifically space to give their honest opinion on certain matters. I mentioned earlier the realism and robustness of the outcome delivery plan. If desired, you could similarly enable them to say something in the departmental annual report about departmental capability, including the corporate governance of the Department.

Q41            Chair: Do you think that there is a need for new methods of assessing and appraising board performance?

Martin Wheatley: If one looks at the commercial and other sectors—in the housing board I am on, we see one of the essential parts of our role as carrying out regular self-assessment and getting in independent advice. I suggest that centrally it should be made clear that one thing the board needs to do is to be self-critical and to reflect on and to obtain a degree of external challenge on its performance from time to time. The board operating statement should set out how in practical terms that will be done.

Q42            Chair: Thank you. This is a question for all three. Should non-executive directors, in your view, be subject to binding guidance for their role and conduct? We touched on earlier the differences that there are across the system, but what is your view on binding guidance for their role and conduct?

Dr Gill: The basic code of conduct and minimum standards needs to be binding, and is. For the guidance on how boards operate and what roles there are in that, as I was saying earlier I think that a greater degree of what is there could be on a comply or explain basis so that there is a default as to how these things operate. That is clear and public and people can explain if they want to do things differently, but I think below a certain level there is variation in what needs to be discussed in each Department and how the Minister will want to use that. As Alan said near the beginning, there needs to be the discretion to apply that to the circumstances of the individual Department.

It is difficult to give a very precise answer to this. I think what I am saying is that there need to be clear, binding rules at a very high level to impose minimum standards of conduct and the very basics on how things operate but then discretion beneath that.

Q43            Chair: Building on that question, a little unfairly now as I move down the line, who would oversee that performance and appraisal and how much it reported and, indeed, should they be accountable to Parliament? That is building the question, I appreciate, Mr Wheatley.

Martin Wheatley: The Government Lead NED already plays a strong role in overseeing the performance of boards, doing a certain amount of troubleshooting, which for obvious reasons often happens behind the scenes and doesn’t get talked about. I would certainly support the lead NED giving evidence from time to time to this Committee, although of course they are not a Minister and they don’t have the same accountability. But then I think there are the normal principles of accountability. You would expect Parliament to be holding the Cabinet Office and Cabinet Office Ministers to account as part of their responsibility for overseeing the effectiveness of the Government machine.

It is striking this balance carefully, as Dr Gill said a few minutes ago, perhaps setting some very clear fundamentals and enforcing them but not doing that in a way that stops boards being effective in the situation of particular Departments and taking account of the ways of working that are preferred by a particular Secretary of State.

Alan Cogbill: I think that the rules are reasonably clear and if you were to say, for instance, that you thought the Prime Minister was in the wrong job, predictably that would be the end of it, wouldn’t it, and various misconducts, as it might be seen? But when you talk about binding guidance, I think the point that you followed up with is exactly about enforcement and bite, and there are traditionally two avenues. One of them is transparency and the possibility of parliamentary examination; whether there are any powers of direction at the end of it or whether it simply relies then on public opprobrium or not is debatable.

The other, of course, is the Prime Minister. We have not really mentioned the Prime Minister in this. Thinking back to the 1980s, I was in the Efficiency Unit at the time of the “Next Steps report. A key point that the adviser, Sir Robin Ibbs, made, and made loudly in the right quarters, was that nothing would happen unless the Prime Minister was actively engaged and made it clear that certain things had to happen or not to happen and did that not just by putting a name to a minute but by following up overtly from time to time. I think this whole business of how effective boards are and what are the expectations and incentives depends on that. There are avenues back where the Government Lead could have a word with the Cabinet Secretary, could have a word with the Prime Minister. That is just an alternative way of introducing a degree of bite into the process.

Chair: We always enjoy considering the attentiveness of Ministers, if I can put it that way. I think that is a fine note to end our session this morning. On behalf of the Committee, I thank you all for your attendance. It has not been too hot in this room, so we have been quite fortunate. If there is anything else you wish to furnish us with, please do write, but in the meantime, thank you for your attendance.