Source · Select Committees · Public Administration and Constitutional Affairs Committee
Recommendation 17
17
Deferred
Paragraph: 56
Update Corporate Governance Code to stress value of NEDs and advise against automatic removal.
Recommendation
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.
Government Response Summary
The government states it will consider amending the Corporate Governance Code to include provisions on the removal of departmental NEDs, taking into account the committee's recommendations and other reports, while affirming ministerial discretion.
Paragraph Reference:
56
Government Response
Deferred
HM Government
Deferred
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.