MPs call for Corporate Governance Code revamp to fix lack of transparency on non-executive directors in Government

A cross-party group of MPs has criticised a "lack of transparency" on the appointment and activities of non-executive directors (NEDs) in Government and has called for the replacement of the Corporate Governance Code, which outlines the role of NEDs.

In a 57-page report on NEDs, also known as non-executive board members, MPs on the Public Accounts and Constitutional Affairs Committee (PACAC) also raised concern about the politicisation of the positions and highlighted several examples of appointees with seemingly political or personal connections to the Government.

All Government departments have departmental boards, which include NEDs. The boards, chaired by their respective Secretaries of State, are advisory and exist to provide advice and challenge to departments on issues such as strategy, performance, and the deliverability of policies.

Each board is expected to meet on a quarterly basis and has a lead NED and between two and seven NEDs.

PACAC said that despite influencing Government business for over a decade, "little is known about their roles and impact, and there is little regulation on how they are appointed".

It concluded that NEDs often hold "significantly more responsibilities within their departments outside the board than is publicly documented or defined".

"This is problematic, as it hinders the transparency, consistency, and accountability of their positions," the committee added.

In light of this, it recommended that the Corporate Governance Code be updated to reinstate the "independence" of NEDs and encompass the work of NEDs in Government, both on and outside the departmental board, including any limitations to that.

It also recommended changing the Code to outline the expectation that Secretaries of State should avoid appointing individuals with clear political or personal connections to NED roles.

The committee said changes should also include an expectation that Ministers avoid replacing all departmental NEDs on appointment in order to support transitions between Secretaries of State or administrations.

On the appointment of NEDs, the committee said: "The Corporate Governance Code stipulates that non-executive board members should be appointed on merit through a fair and open recruitment process, but the evidence to our inquiry demonstrates there are a number of exceptions to this."

To tackle this, the committee recommended that the Government Lead Non-Executive should monitor and report on compliance with the Corporate Governance Code, broken down by department, in the Government Lead Non-Executive Annual Report."

It called for the position of Government Lead Non-Executive to be classed as a "significant appointment" under the Governance Code on Public Appointments and that the Government's preferred candidate for the role of Government Lead Non-Executive should be subject to a pre-appointment hearing before PACAC.

It also said that the Lead NED should appear before PACAC to discuss the content of their Annual Report.

PACAC Chair William Wragg MP said: "Non-executive directors often bring valuable outside experience into Government. However, not enough is known about who they are, what they do, or how they are recruited. This risks damaging public confidence in non-executives and undermining their potential contribution.

"We strongly believe there should be a clearer separation between the role of political or personal adviser and that of objective non-executive board members. The recruitment and appointment of non-executives should follow a fair and open process and have independent oversight."

Wragg added: "The Government must also bring some light to the activities and effectiveness of non-executives. We found that their responsibilities can be significantly greater in scope than publicly advertised and vary between Departments.

"We would like to see the Government Lead Non-Executive become the de facto regulator to bring much needed consistency and accountability to the role across Government."

Adam Carey