Non Executive Directors

New challenges for independent non-executive directors (NEDs)

The FSA (now FCA) expects NEDs to play a pivotal part within the firm’s governance by ensuring that the firm is meeting its responsibilities to retail customers and other stakeholders.

The guidance proposes that amongst the issues that NEDs should consider are:

• Taking a strategic view of the treatment of their customers;
• Being confident that the firm is identifying, monitoring and mitigating risk to its customers;
• Having the right mix of skills on the Board and the right information to be able to constructively challenge the executive; and
• Supporting a culture within the firm that takes into account fair treatment of customers

Clive Adamson, director of supervision (FSA) , conduct business unit said: “Non-executive directors have a duty to challenge the management of their firms where they believe the firm could do more to ensure that customers get fair treatment. Our consultation sets out the clear expectations that we have for NEDs and we expect them to play their part by considering this carefully.”

The words above are a direct quote from the FSA website and can be found on

http://www.fsa.gov.uk/library/communication/pr/2011/106.shtml

But what in reality is significantly different from what has happened in the past?

  • The NED now needs to spend more time understanding what is expected by the regulators, from the organisation and themselves.
  • The NED will need a more expert understanding of the company’s business model and the data and insights required to make challenges and judgments.
  • In addition they require the independence and authority to challenge with credibility.
  • The board will need to engage NEDs who are subject matter experts and provide them with timely Management Information to be able to challenge in a credible and meaningful way.
  • But boards generally and many of the existing NEDs on them do not have the right skills mix, experience or relationships to enable questioning of the executive team in a robust and constructive manner.
  • Many companies do not seem to realise that the information pack that will be required by the board and by an effective NED is unique to that organisation, there are no off-the-shelf solutions that can guarantee sufficient information.
  • Companies have spent years making themselves appear different so customers buy from them rather than competitors, so it is not a surprise if their strategies, risks and therefore their key performance indicators will be different too.
  • New management information systems need to be put into place along with perhaps some new NEDs.
  • Skilled confident and trained NEDs will be required, although their position and terms of reference will change significantly altering relationships, work load and responsibilities.

Therefore for most companies there is a need to implement a change programme that includes new management information systems and a new style (and perhaps a change of persnnel) for NEDs.

aSource Global can help identify the systems and management information required for your company’s governance. We can help determine whether your NEDs skills are suitable and can put into place a tailor-made programme for individuals or identify new candidates.

We can bring both experience and knowledge as our teams of consultants are a combination of NEDs, consultants who have been directors or board members of major public listed companies or operational management who understand the domain in depth. We can be efficient in the work we carry out and be sensitive to the needs of the organisation while supporting you in achieving your goals.

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