NEDs can enhance the standing of board sub-committees?

NEDs can enhance the standing of board sub-committees as follows:

1.  NEDs help to limit the power of executive directors. As board sub-committees

normally comprise solely, or a majority of NEDs, this ensures that executive power is limited in key areas such as remuneration and appointments.

2. NEDs can provide specialist knowledge and experience to enhance the decisionmaking ability of the board and the sub-committees. Experience specifically relates to other companies with which NEDs have contact. For example, many NEDs are NEDs or even executives of other companies; they can therefore check whether remuneration, for example, is congruent with industry standards from first-hand experience.

3. NEDs should be independent of the company – that is their actions are not influenced by other senior management in the company. Independence helps ensure that board and sub-committee decisions are acceptable to shareholders – they will be less concerned that executive directors are running the company for their own benefit.

4.  To maintain independence, NEDs are rotated and the committees therefore refreshed on a regular basis. This rotation helps to ensure that NEDs do remain independent, providing the benefit mentioned above. Rotation ensures that NEDs do not get too close to the executive directors and are not swayed by executive decision making from familiarity threats.