A Jolly Good Lunch: The Evolution of the Role of the Non-Executive Director in the UK
18 Pages Posted: 24 Jun 2018
Date Written: January 2002
Concern about the financial scandals in the UK of the 1980s, such as BCCI and Polly Peck, began what is still an ongoing debate about corporate governance. Recommendations from a series of committees examining the issues led to the introduction of the Combined Code on Corporate Governance, with which listed companies must comply. The Code identifies the influence of the non-executive director as a key governance mechanism, in terms of accountability. A substantial literature has developed examining variables contributing to the effectiveness of the non-executive director; much of this remains contestable.
This paper attempts to illuminate this discussion by exploring the development of the role of the non-executive director within UK companies from a historical perspective. It seeks to establish when and how the non-executive director came to be seen largely as a supernumerary presence on the board and the significance of this, given the links now perceived between board membership and accountability with financing, ownership structure and company performance. Through the first half of the twentieth century the occupation of being a company director apparently conveyed status without responsibility for many holding such positions, to an extent well illustrated in the popular literature of the day.
The paper goes on to ask when and why the non-executive director first came to be seen as a potential remedy for governance inadequacies. Complementing recent analysis of the links between contemporary concerns with corporate governance and historical trends influencing business enterprise, the paper seeks to set the evolving role of the non-executive director in the context of changing attitudes to corporate regulation.
Keywords: Non-Executive Directors; Corporate Governance; Cadbury Code
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