Non-execs fail to learn all the facts of company life

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The Independent Online
NON-FINANCIAL performance measures may be all the rage among management theorists, but they have apparently yet to reach non-executive directors, according to a survey by KPMG Peat Marwick, the accountants and consultants.

The study, published last week, finds that while non-execs generally receive the necessary information on such traditional indicators as profit and loss, cash-flow statements and external auditors' reports, they tend to be short of data relating to newer performance measures, such as customer satisfaction, management ability and quality.

While more than half said these criteria were important in helping them do their jobs, two- thirds of the 235 non-executives questioned in the survey of the 1,000 biggest companies in Britain did not receive details of customer satisfaction levels, 58 per cent were given no information on quality indicators and 52 per cent were not told about the results of management appraisals. Further, despite the current enthusiasm for benchmarking, 58 per cent were not told how their companies' performance compared with that of market leaders.

Gerry Acher, KPMG's head of audit and accounting, added that it was surprising that a large minority relied entirely on internal information. 'I urge them to use external sources to give a broad view of their companies,' he said.

The survey also finds evidence of patchy adoption of the Cadbury Committee call for non-executive directors to be appointed by a nomination committee rather than the chairman. Mr Acher said that with 51 per cent of those surveyed appointed in the old way, 'it will be interesting to see if, in the future, the chairman's influence wanes in this respect'.

At the same time, there is a clear indication that many non- executives face twin - and possibly conflicting - demands to give strategic advice and represent shareholder interests.

Mr Acher said: 'They appear comfortable with this dual role, but are clearly not getting sufficient information on some of the key strategy areas that one might expect.

'There are areas where matters of strategic importance and the receipt of vital information need to be brought into line. The non-exec role should be to add shareholder value rather than just protect it.'

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