Written evidence from The Ministry of Justice (NED15)

Public Administration and Constitutional Affairs Committee

The Role of Non-Executive Directors in Government inquiry

1. The Ministry of Justice (MoJ) welcomes the opportunity to respond to the PACAC’s inquiry into the Role of Non-Executive Directors in Government and share how its NEDs are appointed and utilised.

The roles and activities of non-executives

2. The fundamental role of a NED is set out in the Corporate Governance Code for Central Government Departments 2017 (the Code) and is supported by the department’s own tailored Board Operating Framework (BOF).

3. The Code outlines that NEDs are a crucial element of an effective board whose role it is to advise on strategic and operational issues affecting performance as well as scrutinising and challenging policies. Their constructive challenge is accepted and expected as an essential part of good governance.

4. As recommended by the Code, MoJ NEDs provide governance support by chairing specific board committees such as the Audit and Risk Assurance Committee and the Nominations Committee, providing feedback and assurance as documented in the BOF.

5. Other central activities undertaken but not limited to, as part of their role include:

• Advising on performance and operational issues and the effective management of the department.
• Supporting, guiding, and challenging the department’s Outcome Delivery Plan.
• Participating in the processes for recruitment and appraisal of senior executives and succession planning.
• Participating in the recruitment of public appointees.
• Challenging and scrutinising the plans for delivery of Major Projects and ensuring these deliver strategic benefits; and
• Leading independent reviews or chairing Challenge Panels to help the department scrutinise and improve work, some recent examples included the Parole Board Tailored Review and Probation reform.

6. NEDs participate in activities that reflect ministerial and departmental priorities and where their specific individual skills can be utilised to maximum benefit. Some recent examples include NED advice and scrutiny on departmental efficiency; the HMCTS Reform programme, commercial processes and work on employment and reoffending. The NEDs meet regularly with the Permanent Secretary to discuss departmental business and how they can add value and provide additional support, guidance, or scrutiny. The chair of ARAC has regular one to one meetings with the Permanent Secretary to discuss departmental risk, assurance and advise where further management oversight is required.

7. They will regularly meet other departmental NEDs to share best practice and lead on activities when the department asks and/or where it is centrally recommended that a NED is nominated as a lead to represent the department e.g., Climate change or levelling up. The department’s NEDs also contribute expertise to cross-government work, for example through membership of the Government Commercial Oversight Board which considers commercial training and accreditation for commercial colleagues across Government.

8. As per the Code, the MoJ has a designated Lead NED. As well as the NED responsibilities listed above, their role includes additional, specific duties such as:

• Supporting the SoS with his duties as the chair of the board.
• Supporting the chair to ensure a board effectiveness evaluation is carried out annually and with independent input at least once every three years.
• Regularly meeting other departmental NEDS to ensure their views are understood and that the SoS is made aware of any concerns.
• Liaising with the Government Lead NED.
• Reporting the collective view of the departmental NEDs in their own section of the department’s annual report and in the Government Lead NED annual report; and
• Undertaking the Permanent Secretary annual appraisal.

9. Further clarification of NED roles, expectations and responsibilities can be found in the Public Bodies Non-Executive Director Principles and the Code of conduct for board members of public bodies. The combination of this guidance provides both NEDs and departments a clear framework on how they should be utilised to maximum effect whilst maintaining strong corporate governance.

10. The consideration of the future role of NEDs in Government as outlined in the Declaration on Government Reform is welcomed.

Experience and expertise

11. The Code states that NEDs “appointed by the Secretary of State will be experts from outside government” and “will come primarily from the commercial private sector, with experience of managing large and complex organisations” although departments should aim “as far as possible to ensure there is at least one non-executive with substantial experience in the public and/or not-for-profit sectors”.

12. This external and independent perspective brought by NEDs to the department’s business is embraced. Specific skill sets needed to help the department deliver its priorities have been identified in different ways such as the annual board effectiveness evaluation.

13. Current and previous NED skill sets sought by the MoJ have included but not limited to:

• Finance
• Digital
• Change and project delivery
• Commercial
• People and talent
• Analytical and Data

14. In appointing the chair of the Audit and Risk Assurance Committee the MoJ follows the guidance in the Audit and Risk Assurance Committee handbook, and has appointed a “suitably experienced” NED to ensure that the committee discharges its responsibilities effectively.

15. To maintain objectivity when challenging departmental performance and delivery, a NED should follow the principles and rules of general conduct set out in the Code of conduct for board members of public bodies. This also informs NEDs as to how it may raise concerns if they believe they or any staff are being asked to act in contravention of the code.

The appointments process

16. The MoJ recruits and appoints its NEDs including Lead NED in accordance with the guidance provided in the Code guidance notes (paras 2.12 – 2.21).

17. All MoJ departmental NED vacancies are advertised on the Public Appointments website. Transparency data is provided at the various stages of the recruitment process to Cabinet Office which includes diversity, location, and details of the assessment panel.  A compilation of all departmental NED recruitment data is published in the Government Lead NED Annual Report.

18. The MoJ is aware that the Committee on Standards in Public Life has recommended in its Upholding Standards in Public Life that the appointments process for NEDs be regulated. (Recommendation 25). The department has complied with current guidance when recruiting NEDs which has resulted in excellent candidates being appointed, based on merit.

19. The Code is explicit in asking NEDs to “disclose any actual, potential or perceived conflict of interests”. The department begins the collection of these from the start of recruitment and throughout the term of an appointed NED. For each governance meeting attended by NEDs, a declaration of interests is required. Appropriate courses of action are then determined as necessary.

20. A list of all departmental NED actual, potential or perceived conflict of interests is published and a link to these can be found in the MoJ annual governance statement.

Governance and accountability

21. NEDs are contracted to act in an independent manner bringing expertise, scrutiny, and challenge, to support their department in delivering better outcomes for the public. They have no executive management role and do not have any decision-making powers.

22. They are bound by the Code of conduct for board members of public bodies with ministers being accountable to Parliament for the appointments they make.

23. These standards and accountabilities are reinforced through individual NED contracts for services which outline if they are found to be guilty of any conduct not matching stated standards, their appointment will be terminated.

24. The success of NEDs is measured collectively with other board members through the annual board effectiveness evaluation and through discussions with the Permanent Secretary during their term.

25. Activities undertaken by NEDs are reported annually in both the Lead NED foreword in the department’s annual report and in the Lead Government NED annual report.

26. The Code was first published in 2011 and updated in 2017. It is intended to be a living document that evolves in line with best practice. The Code provides flexibility through the use of the “comply or explain” mechanism which mirrors that of the private sector UK Corporate Governance Code operated by the Financial Reporting Council. The Code provides a strong foundation for the implementation of good corporate governance and which can be easily updated to adapt to changing circumstances.

August 2022