FSA's views on Non-Executive Directors and their role
"Regardless of the level – firm or group – at which Non-Executive Directors sit, we think they can play a very valuable role in ensuring that firms are well governed. In order to do this you need to be not only honest but also competent. We appreciate that we cannot expect you to have the same grasp of the detail as executives who work full time for a group. That said, we expect them to ask the challenging questions, to understand the business models and sources of profit in the firm, along with the risks which those entail. We want to see high quality NEDs committed to ensuring that their firms are run in a high quality fashion.
So, if you agree to be a NED of a regulated firm or a group containing regulated firms, you must expect us to assess your competence and to hold you to account if you have not conducted yourself in a way which falls below the standards we reasonably expect of NEDs.
I hope this is a message with which you can identify. Boards which are mere paper tigers can be worse than useless because they give false reassurance of high standards - of checks and balances - where none exist. We aren't ignorant of the difficulties which medium sized firms have in getting hold of good directors, but my personal view is that a firm is better served by having a smaller number of hard working, well paid NEDs than a larger number of token ones."
Sheila Nicholl, Director, Retail Firms Division, FSA
For further info. - http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2008/0917_sn.shtml