Non-executive directors are responsible for running a business, and cannot simply turn up and cash in, the audit watchdog said yesterday.
The comments made by the Financial Reporting Council (FRC) followed the publication of a keenly-awaited report on audit reform by the Department for Business, Energy and Industrial Strategy (BEIS).
As part of the reforms, BEIS vowed to clamp down on “rewards for failure”, and make the directors of the UK’s biggest companies more accountable if they had been negligent in their duties.
BEIS said company directors could be fined, suspended, or even have their bonuses claws back if they were found to have been negligent in their duties.
Speaking at an industry event yesterday, CEO of the FRC Sir Jon Thompson said non-executive directors could not merely turn up and take a fee, the Times first reported.
The CEO said he was receiving “constant feedback” as a result of the BEIS plans to increase the responsibility of non-executive directors, including one “very senior” individual who said he was not responsible for the running of the company.
“I had to say, ‘well that’s simply not true.’ In law, you all run the company. You can’t simply turn up, take your fee, not do anything and say, ‘well, it’s the chief executive’s fault,’” said Thompson.
“If you’re on the board, you’re on the audit committee, you have to take responsibility for the fact you’ve got obligations to the people who are investing in your company, or investing their pension money in your company.”
The BEIS consultation will run for 16 weeks. Those interested in responding have until 8 July to do so.