Lord Young of Graffham, the former Conservative Secretary of State for Trade and Industry, launched an outspoken attack on non-executive directors yesterday, saying they should be banned.
Companies that wanted to hire outsiders to sit on their board should hire full-time directors, he told the Institute of Directors' annual convention.
In his departing address as IoD president, Lord Young said part-time non-executive directors could never hope to second-guess the management. "Some are on a dozen or more boards – often in businesses they have no experience of, or ever worked in," he said. "All they can do at best is judge what management tells them. If management is not too forthcoming, they can never even know, until it is far too late."
His intervention comes as Derek Higgs, a leading City banker, begins his investigation into the role of non-executive directors. Lord Young urged Mr Higgs to insist that all board directors were full-time and to make transparent all information about executives' remuneration. "This will end the charade of 'you come on my board and I will go on yours' – or rather, 'you come on my remuneration committee and I go on yours'," he said.
Hecriticised the recommen-dation that the roles of chairman and chief executive should be separated, with the chairman running the board and the CEO running the business. "How do you separate the board from the business? If you do, how much does the board actually know about the business?"
He listed examples of executives who had filled both roles successfully, including Isaac Wolfson at Great Universal Stores, Arnold Weinstock at GEC, Bill Gates at Microsoft and Jack Welch and GE. "There are times when you need two people at the helm of a company and times when only one will do," Lord Young said. "If you legislate for two, when one would be best, you are asking for trouble [and] you will probably get it."Reuse content