Guidance for non-executive directors

Guidance for non-executive directors

The Institute of Chartered Secretaries and Administrators (ICSA) has published a guidance note suggesting ways in which non-executive directors should approach their work allowing them to demonstrate, if necessary to a regulator or court of law, that they have taken appropriate steps to exercise care, skill and diligence in carrying out their roles and responsibilities.

Executive and non-executive directors have the same legal duties.  In addition to urging non-executive directors to refer to the UK Corporate Governance Code and other relevant guidance, the ICSA guidance highlights suggested best practice:

Prior to joining a board, prospective non-executive directors should:

  • Undertake their own due diligence so as to be satisfied that the company is one in which they can have confidence and make a value added contribution;
  • Understand that more is expected of a director with a specific skill or experience;
  • Review the appointment letter and raise concerns before signing, in particular as to the likely time commitment required;
  • Understand the requirements of the Companies Act 2006 in relation to conflicts of interest, gifts and hospitality, and declare any conflicts of interest before appointment to the board.

Newly appointed non-executive directors should:

  • Receive a comprehensive, tailored induction programme;
  • Understand that their role is to provide independence, oversight and constructive challenge to the board;
  • Ensure they receive a schedule of future board and committee meetings, planned well in advance, and insist on receiving information well in advance of meetings which is accurate, clear and comprehensive;
  • Speak to the company’s executive directors at any time over any concerns they may have, and to the company’s advisers if necessary;
  • Ensure they make all decisions objectively in the interests of the company, which in effect means that they should not be overly reliant on the income received from their non-executive appointment;
  • Familiarise themselves with company procedures for recording director’s potential or actual conflicts of interest, and for recording gifts or hospitality, and ensure they report any changes or new circumstances.

A copy of the guidance is available here.

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