Non Executive Directors

THE BACKGROUND

The appointment of Non-Executive Directors (NED) is a key-issue in the current debate about Corporate Governance. Capitis Partners recognise the important of addressing this issue, in the promotion of best practice (FT Letters 04/07/04).

The London Stock Exchange Combined Code states that:

“The board should include non-executive directors of sufficient calibre and number for their views to carry significant weight in the board's decisions. Non-executive directors should comprise not less than one-third of the board.” (Combined Code/Turnbull Report) .

The Higgs Review (2003) built on the previous work in this area, with a particular focus on the role of the NED. This included a focus on Senior Independent Directors (SID's) and how they had a part to play in enhancing the overall effectiveness of Non-Executive oversight.

Higgs also sparked a lively debate about the recruitment of NEDs (FT Letters 01/04/04) . A key tenet of his proposals was that the recruitment of NED's should be done from a wider pool of potential candidates, so that they would be more likely to be truly independent.

THE PRACTICE

The role of a NED is usually quite vaguely defined and is in essence more about a duty of care, coupled with fiduciary responsibilities. NEDs are usually involved in corporate policy issues like executive remuneration and as such they sit on Board Sub-Committees (Remuneration, Nominations and Audit).

We work with The Board to assess it's existing architecture and through these consultations we prepare a detailed brief which then underpins the resulting search. This search is carried out with all the rigour we usually apply to our executive work.

Capitis Partners have worked with a range of Listed Companies to find them Chairman, Senior Independent Directors and Non-Executive Directors.

Additional FT letters
(FT Letters 22/10/04)