Non‐executive directors and the UK's new combined code on corporate governance

Abstract

Purpose

A revised Combined Code on corporate governance was introduced in the UK in 2003 which set out a number of new provisions relating to the composition of the company's Board of Directors and its main Committees. The Code gives greater prominence to the role of non‐executive directors in a company's corporate governance structures and decision‐making processes. This paper examines the main provisions of the Code relating to non‐executive directors and the emphasis it places on the importance of non‐executives being “independent”.

Design/methodology/approach

The paper discusses the main issues concerning the effectiveness of non‐executive directors, drawing in part of the evidence provided by a sample of large UK companies.

Findings

Most companies “comply” with the Code's requirements relating to non‐executive directors and endorse the positive contribution they make to Board and Committee work.

Practical implications

Considers the pros and cons of the role of non‐executives and the issue of what constitutes “ independency”.

Originality/value

This is one of the first papers to examine the provisions of the new Code relating to non‐executive directors.

Citation

Pass, C. (2008), "Non‐executive directors and the UK's new combined code on corporate governance", Business Strategy Series, Vol. 9 No. 6, pp. 291-296. https://doi.org/10.1108/17515630810923595