David Prosser: The long struggle to make non-executive directors really earn their wages

It seems only fitting that the Financial Services Authority has chosen this week, when HSBC was fined a record sum forripping off elderly savers, to resurrect plans to give non-executive directors greater responsibility for looking out for customers at banks and other financial institutions. If executives are failing in that duty, it is the job of non-executives to hold them to account.

One might consider that a relatively uncontroversial statement. If so, one might also wonder why the FSA has left it three years to set out its expectations of non-executives since the last time it tried (but failed) to introduce a new code of conduct.

The answer is that there is a delicate balance to strike. Everyone agrees that non-executives should work for their generous fees, and that it is their job to provide independent scrutiny of executive directors. But make their duties too arduous or the penalties for failing in them too severe and no one will want to serve as a non-executive, or at least no one of sufficient calibre.

The FSA's first stab at codifying the non-executive's duties three years ago did not get that balance quite right. Produced in the aftermath of the creditcrisis – who could forget the lack of banking expertise of former pharmaceuticals boss Sir Tom McKillop, chairman of Royal Bank of Scotland – even dispassionate observers suggested the FSA was hoping for so much from non-executives that it wouldn't be able to find any.

Has it done better this time around? Well, the first point to make is that the latest FSA guidance is no more than a consultation. Nor do its demands seem unreasonable: that non-executives should be able to show they bring balance and expertise to the board, for example, and that they should satisfy themselves that systems are in place to manage risk and ensure that customers are being treated fairly.

What isn't clear yet is the sort of sanctions non-executives might face in the event of a failure. The implication of the FSA setting out their duties is that non-executives should expect the regulator to go after them if they do not fulfill them. What that might mean in practice, though, isn't spelled out.

Certainly, there are already rumblings of discontent in the non-executive community – partly about the way in which this guidance has been sprung upon people, but also about some of thedetail. It sets out seven distinct areas of retail banking where non-executive directors should be challenging practice, for example.

Still, while there is room for negotiation about the final detail of the new rules, there is no getting away from the fact that non-executives have had it too easy for too long. Those who are not prepared to assert their independence should not be taking money for the job.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power