Reviewing Non-Executive Directors

Accompanying the launch of the Higgs Review report into the role and effectiveness of non-executive directors, MORI has carried out a major survey of company directors. The findings show that:

• Nearly half the non-executive directors of UK listed companies have been appointed through personal contact with a board member (48%), one in five were selected through a headhunter (22%), and one in nine (11%) were nominated by an investor, bank, stockbroker or venture capitalist. Only 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%) 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%).
• Nearly two-thirds of non-executive directors have never received any training for their role (62%). Of those who have received training, four in five found it fairly or very useful (81%).
• Fewer than two in five non-executive directors have been given objectives for their role (38%). Three quarters of non-executive directors have never had a formal personal performance review (76%). One third (34%) of companies never review their performance as a board.
• Chairmen are far more likely to discuss company business with their company's investors than are the non-executive directors. Half the non-executive director population have never discussed company business with investors (52%). Non-executive directors in small companies are the most likely to meet with investors.
• The vast majority (92%) 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%). Twice as many executive directors rate independence as the main contribution of non-executive directors (27%), as do non-executive directors themselves (14%).
• 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%). A lack of knowledge/ understanding of the company was cited by one in ten non-executive directors (10%) and one in five executive directors (19%).

• Further details, including copies of both the Higgs Review and MORI reports -- can be found at http://www.dti.gov.uk/cld/non_exec_review
• Non-Executive Directors Survey -- The Higgs Review, Topline Results [pdf document -- 54K]

Technical details

Interviews with 605 directors of UK listed companies were conducted by MORI Telephone Surveys (MTS) between 12 August and 18 September 2002. The sample was drawn randomly from a complete list of directors of UK listed companies. A letter, introducing the survey, was sent to all the directors selected on the 9 August 2002. Quotas were set to achieve interviews with 75 chairmen, 250 executive directors and 275 non-executive directors. Quotas were also set for the number of interviews with directors of FTSE 100, FTSE 250 and other listed companies to ensure that the survey sample was broadly representative. The profile of the sample is consistent with the population of directors overall. The data are therefore unweighted. The sample was structured to ensure that not more than one chairman, one executive director, and one non-executive director from the same company were interviewed. If respondents held more than one directorship they were asked to comment on the one which took up the greatest proportion of their working time.