'Disappointing': Government rejects call to update non-exec director code after cronyism concerns

Government “respectfully does not agree” with PACAC's finding that corporate governance code is not fit for purpose
Photo: Steph Gray/Flickr/ CC BY-SA 2.0)

An influential committee of MPs has criticised the government for rejecting  a set of recommendations to improve transparency and governance of government non-executive directors.

In a formal response today, the government said it would not implement several of the key findings of a July report by the Public Administration and Constitutional Affairs Committee, which called on government to update the corporate code governing non-exec roles “to provide clarity on the types of skills and experience it looks for” when making appointments.

MPs described the code as “not fit for purpose as the main guidance document for NEDs”, because it does not set out the key roles and tasks they should carry out within a department, including any limitations. Their report said the updated document should cover typical activities of NEDs both on and outside the departmental board setting.

But the response, published today, said the government “respectfully does not agree” with the committee’s position.

It said it is “appropriate” that departmental boards “have flexibility to act differently”.

“While a degree of consistency is helpful, it remains important for departments and secretaries of state to have the flexibility to tailor their board to their own local circumstances, demands and priorities,” it added.

PACAC chair William Wragg said the government’s “prevailing sense of unwillingness” to reform the governance code for non-executive directors was “disappointing”.

The government response also defended the appointment of non-exec directors with political or personal connections to ministers to the roles – an issue that has attracted criticism in recent years. PACAC’s inquiry into non-exec rules began in June 2022 after controversial appointments sparked accusations of cronyism – including then-health secretary Matt Hancock making his aide and lover Gina Coladangelo a Department of Health and Social Care non-exec in 2021.

Coladangelo was one of 16 NEDS – of a total of around 80 – with close ties to the Conservative Party, the campaign group Open Democracy said at the time.

They included former Conservative and UKIP MP Douglas Carswell and former Conservative vice-chair – and Jacob Rees-Mogg’s business partner – Dominic Johnson, both at the Department for International Trade; and Nick Timothy, former joint chief of staff to Theresa May, at the Department for Education.

In its report, PACAC urged the government to reinstate independence among non-executive directors, arguing that there “should be a clear separation between the role of political or personal advisers and that of objective non-executive board members”.

The government response said a “small number” of candidates may be appointed to departmental boards “in cases where their skills and experience qualify them as a suitable candidate and matched the requirements of the governance code”.

“Past experience of government can clearly be advantageous, especially when combined with further voluntary or private sector experience,” it argued, adding that barring former spads from NED roles would contravene public appointments rules, which state that previous or current political activity is not a bar to appointment.

Commenting on the response, Wragg said: “It is disappointing to see that the government has failed to take seriously our main recommendations to clarify the role of non-executive directors in government. In its response, there is a prevailing sense of unwillingness on the part of the government to commit to reforming or replacing the outdated governance code.  

“The government has even refused to take greater responsibility for monitoring compliance with the existing code, leaving the public in the dark about recruitment processes, potential conflicts of interest, or questionable appointments of non-executive directors to government roles."

The government did accept some of PACAC’s recommendations, however, including a call to publish a list of NEDs by department on GOV.UK and report data on diversity of NEDs including by ethnic minority.

It also accepted the recommendation to introduce external regulation of non-exec directors, reiterating that it had already agreed to do so in response to an earlier report by the Committee on Standards in Public Life.

Wragg said: “While the government has agreed to implement a small number of the committee’s recommendations, the need for further reform remains. This committee maintains that there ought to be greater transparency and accountability in the appointment and activities of those in a position to work closely with our policymakers.”

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