All friends together

2003

A poll by market researchers MORI has found that nearly half the non-executive directors of UK publicly listed companies were appointed through personal contact with an existing board member.

The research has been released to coincide with the Higgs Review into the role and effectiveness of non-executive directors.

Derek Higgs, a former investment banker and fund manager, said last week that he hoped his proposals would "blow away the last cobwebs of how things were a few years ago – all a bit cosy, a bit familiar, a bit Christmas-ornamenty".

The random sample of 605 directors of UK listed companies also found that only one in five non-executives were selected through a headhunter (22 per cent), and one in nine (11 per cent) were nominated by an investor, bank, stockbroker or venture capitalist.

A key finding of Higgs Review is that directors should be appointed by a nomination committee chaired by an independent director.

Even more revealing, MORI found that a mere four per cent of non-executive directors were appointed through a formal interview, and only one percent answered an advertisement.

Most non-executive directors (81 per cent) received some sort of briefing or induction when they started their role. For many this occurred either before they were appointed or was informal. Only a quarter received a formal induction after appointment (24 per cent).

Nearly two-thirds of non-executive directors have never received any training for their role (62 per cent). Of those who have received training, four in five found it fairly or very useful (81 per cent).

However fewer than two in five non-executive directors have been given objectives for their role (38 per cent). Three quarters of non-executive directors have never had a formal personal performance review (76 per cent). One third (34 per cent) of companies never review their performance as a board.

The Higgs recommendation that a non-executive director should attend meetings between executives and shareholders will also mark a cultural sea-change, according to MORI. Half the non-executive director population have never discussed company business with investors (52 per cent). Non-executive directors in small companies are the most likely to meet with investors.

The vast majority (92 per cent) of non-executive directors are satisfied with their role. Three in ten non-executive directors believe that their experience and knowledge are the single most important contributions they make to the company (31 per cent). Twice as many executive directors rate independence as the main contribution of non-executive directors (27 per cent), as do non-executive directors themselves (14 per cent).

A quarter of directors think that the largest barrier to the greater effectiveness of non-executive directors is their own lack of time or commitment to the company (25 per cent). A lack of knowledge/ understanding of the company was cited by one in ten non-executive directors (10 per cent) and one in five executive directors (19 per cent).

Further details, including copies of both the Higgs Review and MORI reports - can be found at www.dti.gov.uk/cld/non_exec_review.