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Last Updated: Friday, 16 April, 2004, 11:03 GMT 12:03 UK
Are you boardroom material?
Board meeting

A report into the way companies are run has called for more people to become non-executive directors.

But what exactly are Neds, as they're known?

And who is suitable to become one?

Their main function is to exert a steadying influence on a company's board and to bring an independent outlook.

Higgs Report - main recommendations
At least half the board should be independent non-execs
They should be assessed once a year
They should serve a maximum of two three-year terms
Non-execs should have closer relationships with major shareholders

Non-execs are part-time and will have usually have extensive business experience. They have no role in the day-to-day management of the company.

It can be a vital job - some observers say big US scandals such as Enron could have been avoided with greater vigilance by non-execs.

It became even more important in the light of the Higgs report, which said at least half of a board should be made up of independent non-executive directors.

One concern has been that jobs are shared around an "old boys' network".

Some people have as many as 10 different board posts.

It's too much of an old boys' network and there's not enough independence and objectivity
Thomas Power, Non-executive director

But appointing cronies can lead to conflicts of interest, and might bring the independence of the non-exec into question.

So if more people are to be recruited to boards around the country, where will they come from?

They could be people who are already executives, providing they have the time to do both jobs.

They could also be retired businesspeople who still have much to offer, says Peter Coppard, who runs a recruitment website, Non-Executive Director.

"There is so much expertise out there," he says.

"Most of the people who enrol on our database have huge track records and have often run their own organisation.

"You can't get that type of experience unless you buy someone in as a non-exec."

Mr Coppard says there can be many benefits to a company.

  • It's a fresh pair of eyes to look at practices and ask: "Why do you do that?"
  • Non-execs can bring capital to a business, or might have good links with venture capitalists.
  • Board meetings can become more formal, which can be good for a business.

    Mr Coppard specialises in recruiting non-execs for small and medium-sized companies.

    Strong boards make for strong companies that deliver value to their shareholders and prosperity to their employees.
    Peter Montagnon, Association of British Insurers
    "There's an inherent reluctance to take people on because they think it's going to cost them an arm and a leg," he says.

    "But for 15-20,000 a year they will get someone making key points which could alter the way the company goes."

    He agrees that non-execs should not spread themselves too thinly.

    "More than three jobs is pushing it because I don't think you can do justice to the firms," he says.

    Average pay for a board position with a large company is about 35,000, although there are calls for that to rise - even double.

  • WATCH AND LISTEN
    The BBC's Marcia Hughes
    The life of a non-executive director


    Angela Knight
    The head of the Association of Private Client Investment Managers and Stockbrokers talks to Adam



    SEE ALSO:
    New rules to stop boardroom abuse
    20 Jan 03  |  Business


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