Public sector NEDs: it’s about depth and diversity of experience
7 January 2021: Following a webinar with HMRC’s Jim Harra last year, ICAEW’s series on how to be a non-executive director in the public sector continues in 2021.
Our popular series of webinars on being a non-executive continues on 26 January, with a conversation with Auditor General for Wales Adrian Crompton on how non-executive directors (NEDs) can contribute to effective governance and the questions they should be asking.
This follows a webinar last September with HMRC Permanent Secretary Jim Harra and experienced non-executive director (and current Chair of the Office for Tax Simplification) Kathyrn Cearns FCA about the role of NEDs in central government. Together, they gave their respective perspectives of working with NEDs and being a NED in the public sector.
The webinar is available on-demand if you didn’t have a chance to hear it the first time or would like to listen to it again.
Due to the high volume of questions on the day, we were unable to answer all those posed but we caught up with Jim Harra following the event.
Harra underlined the importance of a diverse board and noted that with a board of seven overseeing HMRC, the aim is to have as diverse a membership as possible. He said: “Each time a change in membership occurs, this provides us with an opportunity to recruit members with different perspectives and backgrounds.”
He emphasised that the role of NEDs is to “provide ongoing challenge, scrutiny and support to the executive team, and assurance to me. The NEDs look across the entirety of the department’s work and are able to set their own agenda for what they focus on.”
The time commitment for a NED role can vary, but as Harra noted HMRC always gives an indicative time commitment when it recruits. “In practice, our NEDs will often volunteer to give us additional time if their circumstances permit,” he said. “HMRC pays a fee through the payroll system for the period of the appointment.”
Chartered accountants often take on NED roles when they are getting towards retirement, but younger members are often equally as interested in these roles. Harra stressed: “It’s not necessarily about age, it’s about depth and diversity of experience. In practice, most of our current NEDs are at a stage in their lives where they have a portfolio of non-executive roles alongside or after an executive career at senior level.”
Financial or audit experience can often be useful for a NED role. Harra said: “All NED roles advertised will outline the skills being sought” and “people from an accountancy background can bring general experience to bear that may be suitable for a board-level NED, as well as specialist professional experience that might be suited to, for example, the Audit & Risk Committee.
“Beyond that, HMRC welcomes the assistance and insight of independent external advisers (often unpaid, I’m afraid) on a range of committees, such as the Customer Experience Committee, the Admin Burdens Advisory Board, and the General Anti-Abuse Rule (GAAR) Panel.”
If looking for a role as a NED in the public sector one of the places where such roles are advertised is the public appointments website. According to Harra, these roles in HMRC are “advisory and do not have a role in operational decision-making, tax policy or individual taxpayer matters. Our NEDs do not have the fiduciary responsibilities of a company director.”
Despite that, high standards are demanded from public sector NEDs. Harra reminded us that board members are “required to uphold the seven principles of public life (the Nolan principles): selflessness, integrity, objectivity, accountability, openness, honesty and leadership.”
Alison Ring, director for public sector at ICAEW, commented: “It was extremely useful to see the role of non-executive directors from the perspective of a senior chief executive in the public sector and the importance he places on the value of independent and expert advice from a diverse range of board members. The insight of a vastly experienced public board director and ICAEW member on what she believes a NED should do in practice was also tremendously helpful.
“Chartered accountants are ideally placed to apply for public sector non-executive director roles, putting their experience in accounting, audit and financial management to good use for the benefit of us all.”