A recent UK survey from E&Y of board members of the UK's leading 500 companies suggests that with the increased interest in corporate governance issues the role of non-executive directors will become far more important.

96% of respondents believed the role of the non-executive director is either fairly valuable (40%) or very valuable (56%).

When asked specifically what it was they valued 79% mentioned their insight or experience, 74% their independence and 70% the challenges they make.

64% said that the influence of non-executive directors will increase with only 5% saying they will become less influential.

Non-executive directors were regarded as particularly important within the technology and financial services sectors. 100% of respondents in both sectors said their role is valuable. Their influence was expected to grow most rapidly within the construction/property and manufacturing sectors, with over 75% of respondents saying they would become more strategically important.

Those surveyed explained that the increased importance of non-executive directors was a combination of push and pull factors. As one respondent said, "the pressure from corporate governance will require companies to have a strong independent set of non-executive directors." Another added, "they (the non-executive directors) can each make an individual contribution to the Board, based on their experience. It is their breadth of view on strategy which can help the execs."

Respondents also believed that the twin pressures of globalisation and difficult economic conditions would ensure that non-executive directors would have more of a prominent role within and organisation. It may also be a more risky one. As another respondent commented, "the legal responsibility of non-execs has really come to the fore over the last year and they are directly in the firing line." This comment is equally applicable in South Africa from press comments regarding the role of non-executive directors in a number of companies.

In South Africa the valuable role that non-executives can provide is being increasingly recognised. The clarification between executive, non-executive and independent directors has been a highlight of the second King report on corporate governance, with the majority of the board recommended to be non-executive and sufficient of these being independent.

One area of concern expressed around this requirement is the pool of talent available in South Africa, but this should not be allowed to justify non-compliance. The South African business environment needs to actively work towards increasing this pool, by providing adequate training to potential new directors and giving more opportunities to people outside the current "old school tie" network. In order to achieve an appropriate mix of race, gender and age, non executive directors will also have to ensure that they don't accept too many appointments.

More importantly are the actions that non-executive directors take once appointed. They have to be able to devote adequate time to the job throughout the year, and not just attend board meetings. They also have to be prepared to meet directly with management to ensure that they get the full picture, and ask the right questions at board meetings.

Ultimately, non executive directors have to be prepared to stand up at board meetings and disagree with executive directors if necessary. By being the representative of shareholders they will not be fulfilling their duties if they rubber stamp suggestions of the executive directors.

Source: Garth Coppin, Audit, 011 772 3000, www.ey.co.za

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