Are non-executive directors the answer to problems raised by recent accounting scandals?
Paul Moxey considers the roles of NEDs Many see non-executive directors (NEDs) as the solution to most of the corporate problems characterised by Enron, WorldCom, Equitable Life, MyTravel and Vivendi. Yet before these debacles, most people, including a lot of directors, were not sure what non-executive directors were for. Tiny Rowland described them as little more than decorations on a Christmas tree. Since Enron, there now seems to be a growing consensus that NEDs are a mixture of policemen and guardians of shareholders interests. This view ignores the fact that NEDs also have an important strategic role. It also wrongly assumes that NEDs have a different responsibility, from that of executive directors in respect of a companys shareholders. Back in 1998, the UK Hampel Committee commented that NEDs are normally appointed to the board primarily for their contribution to the companys strategy. Hampel found general acceptance that NEDs should have both a strategic and a monitoring functi
