NEDs worry about a lack of clout

Jan 12 2005 by Nic Paton Print This Article

Non-executive directors who feel they need to control or rein back their chief executive should be examining their relationship as a matter of urgency, an HR consultancy has suggested.

The advice has come as latest research by consultancy IRS has argued that a growing number of non-executive directors believe they lack the power to control a chief executive with a large stake in a company.

Will Dawkins, a partner at Odgers, Ray & Berndston, warned that it was not the job of the non-exec to “control” the chief executive.

“Their role is to challenge them and hold them to account. If a non-executive chairman feels he should be controlling his CEO, then his relationship is wrong,” he told Management-Issues.

Non-execs retained the power to remove a CEO who was under-performing, Dawkins added.

The IRS poll interviewed 400 non-execs to find out whether they believed they had

enough collective power to control a chairman or chief executive with a large stake in a company.

Just over half - 55 per cent - said they did, compared with 82 per cent when IRS asked the same question two years ago.

They also felt less empowered than two years ago on the issue of controlling directors' pay or complying with corporate governance guidelines.

Non-execs were spending increasing amounts of time carrying out their duties without a comparable rise in pay, the survey also found.

There had also been a significant increase in the use of specialist consultants - mainly headhunters - to help boards find non-execs.

The vast majority now held shares in the company compared with about half a decade ago, IRS added.