Publication NEDs – Monitors to Partners

Executive Summary

Twenty-five years after Cadbury, there is much to celebrate within UK corporate governance. However, it may also be time to rethink some of our underlying assumptions. Corporate governance has become an industry in itself. The focus is too often on how to comply with an overly prescriptive list, rather than choose the structure and processes that help create long-term value.

This report has been prepared in collaboration with chairmen, non-executive directors (NEDs) and executives. In its conversations with them, Tomorrow’s Company has come to some clear conclusions about the shortcomings of our current approach to the role of NEDs and to corporate governance generally.

This paper argues that a new direction of travel is needed that supports innovation in governance structures, greater alignment between NEDs and executives, and a focus on long-term investment with appropriate risk-taking. The primary focus is to provide this critique, and then to pose some questions and actions for how this could be put into practice by boards, investors, policymakers and regulators.

“The length of board packs, board agendas and the background of many NEDs in finance, legal and compliance contribute to NEDs too often seeing their role as ensuring good corporate governance and risk mitigation. This focus is at the expense of contributing to building a successful and sustainable company.”

Mike Wilson CBE, Joint Founder & Life President, St James’s Place

“We applaud this report from Tomorrow’s Company. Corporate Governance has shifted too much to a ‘form over function’ model and indeed an industry unto itself. This is a reminder that a key – and important – role of the Board is ensuring the appropriate focus on the long-term interest of the company.”

Dominic Barton, Global Managing Partner, McKinsey & Company 

“This paper provides a helpful catalyst to allow Boards to challenge themselves, step back and decide what they are there to do and how they add value. This isn’t just more process. It reflects the reality that Boards will have a different focus at different points in the life cycle of a company. The work of the Board will also reflect the capabilities of the Executive team and the dynamic between Chairman/NEDs and CEO. No two companies are alike and governance must address the reality of each individual company. So this paper brings a welcome focus on the dynamic of governance and on form over substance.”

Robert Swannell, Chairman, Marks & Spencer