The risk-reward balance for non-executive directors has shifted. Dawn Cowie examines the regulatory and legal climate, and Colin Carnall weighs up the demands and enduring appeal of the role.
An enlightened non-executive director (NED) need not live in fear of litigation, regulatory fines and reputational damage. However, greater scrutiny of corporate behaviour by regulators and engaged stakeholders does mean that the role carries greater risk and higher personal liability.
NEDs are expected to go further to challenge management decisions and to probe the effectiveness of financial controls and risk management systems. The UK Corporate Governance Code and the Financial Reporting Council’s (FRC) Guidanceon Board Effectiveness set out the broad principles and standards expected of NEDs but this still leaves room for interpretation. One of the biggest challenges for NEDs is to know when and how far to intervene and when to let management get on with running the business.
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