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Matt Hancock MP
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The Hancock precedent and role of non-execs

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Until last week, the man in the street probably had no idea that the halls of power are filled with NEDs. We take a look at the role.

1st Jul 2021
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It is sad that Cole Porter is no longer with us. With his philosophy that “in olden days a glimpse of stocking was looked on as something shocking, but now, God knows, anything goes,” he might have been the ideal spad for the current government.

This might seem a little odd, given the Conservative Party’s tradition of demanding morality from its constituents and branding itself “the party of the family”. Today, the new brand may have to be “the party of the families”.

For anyone that has avoided the news over the last few years, a spad is a special adviser to politicians. Previously confined to the political shadows, they now periodically hit the front pages for all of the wrong reasons, the most notable example until last week being Dominic Cummings.

Non-executive directors (NEDs) often perform sterling service, but rarely hit headlines or make waves. Indeed, until last week, the general public would probably not have realised that NEDs even existed.

Many AccountingWEB readers will have acted in this capacity at some point, or aspire to do so on (semi-)retirement. More commonly, most of us interact with NEDs on a regular basis, whether at AGMs, audit meetings or possibly when a transaction is in the offing.

Accountants also frequently get asked to sit in on interview and selection processes when clients are trying to bring a NED on board. Indeed, those of us in larger practices will even have them on our own boards.

I thought knew quite a lot about the breed and their relationships (pun wholly intended) with the executives they regularly share see across highly polished boardroom tables.

The Hancock Affair

Judging by press coverage of The Hancock Affair, it seems that I have been living under a some highly embarrassing misapprehensions and dread the arrival of angry clients queuing up to ask why their NEDs are not performing the services of those assigned to Departments of State.

The departure of health secretary may have made this a historical document but, then again, Mr and future Mrs Hancock are now equally separated from their roles as CEO and NED, so perhaps we can all heave a great sigh of collective relief and go back to the good old days when the roles of non-execs were clearly defined.

The terms of reference did not generally include the need to provide a sinecure for friends and lovers. Instead, in the days of Cole Porter and long beyond, the archetypal non-executive director was expected to be completely independent, have probity as his or her middle name and operate as a safeguard against executive excess or misjudgement.

Ignoring the sleazier aspects of the current scandal, it is hard to undestand how someone who has been operating in an executive capacity can simultaneously claim to offer independent oversight as a NED.

Independent oversight

My uncle had been a captain of industry, rising to the position of joint managing director of a retailer with a household name. For many years after his retirement from the role, he took up non-executive positions with other equally distinguished organisations.

His purpose was to offer wisdom and the benefits of a lifetime’s experience to organisations that were aspiring to match the performance of the one from which he had retired.

The companies that recruited him tended to be run by people that he had come across over the years but would certainly not have regarded as friends.

The same criteria have always applied to NEDs appointed by clients. Similarly, when an accountancy practice was looking for non-executive directors, the main criteria always included a background in either the same industry or one with which there were many parallels, for example the law.

The idea of a unit dedicated to the health of the nation appointing a retailing marketeer as a NED is the equivalent to PwC asking José Mourinho to join their board in that capacity. To be honest, I haven’t actually checked who PwC’s NEDS are, so perhaps Mr M is already in situ?

Following the pandemic, many organisations are going to need a helping hand and therefore there has to be every chance that accountants, with their wide and deep understanding of business practice, will be in high demand for NED jobs. That is as it should be. But if you happen to get a call from the health ministry, it might be a good idea to buy a chastity belt before heading off for the interview.

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By Hugo Fair
03rd Jul 2021 13:47

A fun poke (yeah I know) at an easy target, but ...

"there has to be every chance that accountants, with their wide and deep understanding of business practice, will be in high demand for NED jobs"?

Many people with a "wide and deep understanding of business practice" may well be accountants (or CIOs or CEOs or Marketeers or ..); but not all accountants have that rounded expertise.

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paddle steamer
By DJKL
05th Jul 2021 12:17

At least Mourinho would have some relevant experience given the Doctor issue he had at Chelsea, though frankly I think he would be far better suited to Transport as he knows how to park a bus.

Regarding paying the wife or girlfriend, pretty common "tax planning" with owner managed business entities, the skill is obviously to not have both on the payroll at the same time.

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