A leading UK business body has launched an investigation examining the role of non-executive directors following a succession of corporate scandals.

The Institute of Directors says its commission will place the role of non-executive under a microscope because “recent corporate scandals and collapses have raised concerns about their effectiveness”.

In October last year, the IoD released a report describing former Post Office board members of being “excessively passive” and “absorbed in a culture of mistrust” at the time of the Horizon software scandal. The debacle saw 900 sub-postmasters wrongly accused of fraud between 1999 and 2015.

Jonathan Geldart, the IoD’s director-general, says: “The role of non-executive directors has evolved significantly over the past two decades and it is crucial to assess whether they are delivering the anticipated benefits to corporate governance and value creation.”

The commission will be chaired by House of Lords member Baroness Evans of Bowes Park (pictured, above), a former head of policy at the British Chambers of Commerce and the Investor Relations Society.

She said: “Our goal is to support boards and policy makers in fostering a culture of responsible risk taking and effective governance, ultimately enhancing societal trust in UK business.”

Three-pronged approach

The commission has been given a three-point mission: evaluate whether non-executive directors are adding value to boards and corporate governance generally; identify the main challenges and obstacles that face non-execs and how they can be overcome; and, lastly, make recommendations on more effective use of non-execs.

The commission comes not just at a time when scandals have raised questions about non-execs, but also as they face a significant diversification of their workload.

Not only must they supervise company strategy but integrate concerns about climate change, diversity and inclusion, artificial intelligence—all while helping navigate a heavily uncertain economic landscape.

Last year, the UK Corporate Governance Code was revamped. It included new provisions asking boards to report on the way culture is embedded, promote diversity and inclusion, abide by a new minimum standard for audit committees, monitor risk management and internal controls, and disclose “malus and clawback” provisions.

Non-executives also face the prospect of a new audit reform bill that could see regulators given new powers to sanction audit committee members for failures in financial reporting and audit.

The IoD has called for the code to reflect the need for boardroom IT skills and also backed the Better Business Act campaign, which calls for a rewrite of directors’ duties in the 2006 Companies Act.

The campaign seeks a revision that would give directors a duty to recognise a wider stakeholder group and a company’s “impact on people and planet”.

A review of the non-executive role seems timely, given the increasing complexity of the issues affecting business. Non-execs will brace to hear what the IoD has to say.