Non-executive directors: How useful have they really been?
Little is known about the contribution of non-executives in Whitehall departments since their role was expanded in 2010. A new study aims to find out how they work
What role is there for outside expertise in the running of a government department? For some time now in the UK, one way in which such input has been made has been through non-executive board members or non-executive directors. The Constitution Unit is undertaking a project to look at who non-executives are, what they do and the impact that they have had. The work is being led by former senior civil servants Alan Cogbill, Hilary Jackson and Howard Webber. We have felt encouraged following discussions with Cabinet Office, who have expressed interest in seeing the results.
Non-Executives: the evolving government approach
Governments have drawn on external contributors for a long time, but the term “non-executive” is thought to have been first used in the early 1990s. In 2005, the Treasury set out guidance on non-executives in its Corporate Governance Code. The code commented that much what it said of non-executives, as well as of the operation of departmental boards, was new, “reflecting an agenda which has developed rapidly”. It recommended that each central government department board should have at least two non-executives, preferably more, with the aim of providing support and challenge.
Following the 2010 election, the use of non-executives developed with the appointment of a lead non-executive for government, former BP chief executive Lord Browne.
This drive formed part of Cabinet Office minister Francis Maude’s wider civil service reform plan for the civil service. He saw non-executives as having a key role in delivering savings, providing the kind of input for which consultants had previously been paid millions of pounds.
In 2011, Cabinet Office with HM Treasury issued a major update of the code. This incorporated the protocol on “enhanced departmental boards” issued in 2010 and formally defined the role of non-executives, including departmental leads and the government lead. Enhanced boards were to be chaired by the secretary of state, have roughly equal numbers of ministers, senior officials and non-executives and provide strategic and operational leadership. They were to advise and supervise five main areas:
- strategic clarity;
- commercial sense;
- talented people;
- results focus;
- management information.
Among the changes between 2005 and 2011, appointment of non-executives became a decision for the secretary of state rather than the civil service department head. The 2005 Code required of non-executives that they be independent. In 2011, the requirement was that they be drawn largely from the private commercial sector, with experience of managing complex organisations – not necessarily independent, though any conflicts of interest should be properly handled. The minimum number of non-executives increased to four.
Another 2011 innovation was to specify that non-executives could recommend the removal of a permanent secretary whom they believed was a barrier to effective delivery.
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There are thus some grounds for considering non-executive board members as distinct from other external contributors to government. They contribute to the strategic leadership of departments, having oversight on performance across a department’s highest priorities. They have access to privileged information, for example on the greatest risks to progress and how these are being managed. They have regular access to the ministerial team and licence to influence the department’s most important operations. And since 2010, they have a recognised part in bringing about the replacement of a department’s most senior official.
There are many other models for external input, for example reviews, advisory committees or indeed internalising the outsider by appointment as an official, special adviser or even minister. These can allow for input on policy. Policy advice is, however, firmly excluded the remit of the board and thus of non-executives. Even so, the board’s advice on operations and on strategy will have implications for policy. In order to provide such advice, non-executives can expect to be furnished with the fullest information on policy thinking.
A non-executive is thus potentially powerful, in the sense of having the opportunity to improve outcomes across the whole of a department’s business, and to influence the ways the civil service works over the longer term. The right person could do a lot of good. Conversely, the risks of a poor appointment could be significant.
Non-executives: the questions
It is over a decade since the position of non-executives was codified. Six years have passed since the current arrangements began. We have had the benefit five annual reports from Lord Browne and his successor as government lead non-executive, Sir Ian Cheshire. The system has been reaffirmed in a newly updated code. How well has it worked in practice?
We have one verdict from the top, at least in regard to the model of enhanced departmental boards. Prime minister Theresa May’s view is that it has been “an overall success”. The model involves more than the appointment of non-executives, but we can associate this success with them, since she goes on to describe it as, “bringing useful external expertise and challenge into the running of departments”. However, very little is known about the contribution of non-executives: our study will explore which aspects have worked best, why and what can be learned for the future.
Many questions arise. For example, to what extent has it been possible to recruit people with the right profile? There does not appear to be any difficulty with attracting candidates. The Department for International Trade reported over 180 applicants for the post of lead non-executive (it is now standard practice to advertise these roles). Once non-executives are recruited, how is it decided on which areas within a potential wide remit they will focus? Where, in practice, have they tended to focus and how does this compare with expectation? In his most recent report, Sir Ian Cheshire identifies the primary contribution as being outside board meetings, which is perhaps not what an initial reading of the code might lead one to expect. Of the areas where non-executives are most engaged, are some proving easier to address than others, and if so why? Sir Ian’s report indicates both progress and scope to go further in most areas.
Can you help?
We intend to look at such objective evidence as exists about the work of non-executives. We are also very keen to listen to the thoughts of those who have been involved. Which aspects participants feel most positive about should provide important indications of what can be learned and the relative merits of different ways in which the objective of good governance in Whitehall could be taken forward. If you can help, please contact me in the first instance: firstname.lastname@example.org.
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