The role of the non-executive director has changed significantly over the past ten years. Successful non-executive directors need to be strong independent voices in the boardroom and fearlessly challenge any governance breaches.
Research by the Association of British Insurers’ found that the share prices of firms that breached the City’s Combined Code of corporate governance underperformed, mainly when their boards were made up of executive rather than non-executive directors.
Companies with good corporate governance and with strong non-executive voices in the boardroom make more money – they create more value for their shareholders.
Non-executive directors should never be “the decorations on the Christmas tree” as the late Tiny Rowland of Lonhro famously described them.
The non-executive director’s role is to police the board in a strategic, polite and factual manner.
Being a non-executive director involves a legal obligation of the highest degree. If a non-executive director doesn’t challenge bad corporate governance or ethical breaches, they can fall foul of the law.
A company’s board of directors carries the heavy-duty of governance to ensure a duty of care is observed. Very high expectations of good governance are placed on directors, but more so on the shoulders of independent, non-executive directors.