Roles of non-executive directors

Roles of non-executive directors

According to the Higgs Report published in 2003, NEDs have four distinct roles in an organisation:

Strategic

NEDs should constructively challenge and help to develop proposals on strategy. NEDs can bring external knowledge and experience to the company, providing an external check on whether company strategy is appropriate and achievable.

Scrutinising

NEDs should scrutinise the decisions and performance of executive management in achieving agreed goals and targets as well as monitoring the reporting of performance. Again NEDs can provide an external check that board performance targets are appropriate and achievable, and then ensure that reporting systems correctly report the achievement, or otherwise, of those targets.

Risk

NEDs should satisfy themselves regarding the integrity of the financial statements and that the systems of internal control and risk management are robust. NEDs will again be responsible for providing an independent check on these areas.

People

NEDs should be involved in setting executive remuneration as well as appointing directors and providing for succession planning. Involving NEDs in this way removes the independence issue of executive directors setting their own remuneration and deciding who they would like on the board (compared to who they actually require on the board).