Recommendation 14

HM Government · verbatim extract Accepted

The Cabinet Office should confirm in its response to this Report the timeline for implementing the CSPL recommendation that NED appointments should be regulated by the Commissioner for Public Appointments. This should apply to all NED appointments in Government departments. We also recommend that the position of Government Lead Non-Executive should be classed as a “significant appointment” under the Governance Code on Public Appointments, which would require a senior independent panel member to be involved in the recruitment to provide an additional level of scrutiny and public assurance. (Paragraph 54) The Government has confirmed its acceptance of the CSPL recommendation, to add the appointment of NEBMs to the boards of ministerial departments, in its response to those recommendations which was published and laid as a Command Paper in Parliament on 20 July. NEBM appointments will now align with the approach for all other regulated appointments. A refreshed Public Appointments Order in Council 2023 is now in place, updating the list of public bodies regulated by the Commissioner for Public Appointments, including the addition of non-executive directors to the boards of ministerial departments. This commitment has therefore now been met. The classification of the Government Lead Non-Executive position as a significant appointment under the Code will be considered as part of the next refresh of the Significant Appointments list which is agreed between the Commissioner for Public Appointments and Government. The Committee notes that the latest Government Lead Non-Executive Report for 2021–22 shows a drop in female representation on departmental boards since 2020– 21, and we are particularly concerned by the absence of any data on black, Asian, and minority ethnic representation this year. We note that the Government has never reported on any characteristics beyond gender and ethnicity. The Government Lead Non-Executive should continue to report on the diversity of NEDs in terms of gender and ethnicity at a minimum in the Annual Report. We also encourage the Government to consider what other metrics on diversity could be included in this Report. (Paragraph 55) We agree that the Government Lead Non-Executive Report should include data on ethnic minority representation. In respect of the report for 2021-22, the data was not sufficiently disclosed to allow for reporting. We will not mandate NEBMs to disclose data which they would prefer to remain private. We will endeavour to report data where it is made available, including geographic diversity. Now that appointments are regulated, the Commissioner for Public Appointments will monitor department diversity data and publish data as part of the annual process, in addition to specific data published by Lead NEBM. The regulated appointment process will also be covered by the diversity action plan that is owned by the Cabinet Office and will benefit from interventions contained within that. The consensus from oral witnesses to the inquiry, including the current Government Lead Non-Executive, was that NEDs and boards have a role to play in providing continuity and corporate memory between new Ministers and administrations. While we recognise that the Secretary of State maintains the final decision over the composition of their board, there should nonetheless be a presumption against the automatic removal of all serving non-executive board members upon appointment. An updated Corporate Governance Code should set out the value of NEDs in providing corporate memory and expertise in periods of transition between Ministers and administrations, and the expectation that Ministers should avoid replacing all departmental NEDs on appointment. Moreover, it should clarify that if they do so, departments must set out the reasons justifying their decision in the governance statements of departments’ annual reports. (Paragraph 56) Ministerial discretion in Board composition and making changes is an essential element of ensuring their success. However, to date it has not been the case that an incoming Secretary of State removes all NEBMs. We would expect that to continue to be the case. There is also no evidence of NEBMs moving to a new department with a Secretary of State following a reshuffle. We agree with the principle that the Secretary of State should maintain the final decision over the composition of their board. However, we will consider whether, taking into account the recommendations of the Committee, Lord Maude’s report and the Government’s response to the CSPL Standards Matter 2 report, the Code would benefit from being amended to include provisions on the removal of departmental NEDs and the consequences for doing so. The number of NEDs per department is variable. We believe there should be common standards underpinning the rationale for the number of NEDs per department in the interests of consistency and good governance. The Government should confirm in response to thi