Releasing executive directors for outside directorships – the governance implications

Sir Adrian Cadbury (1993), commenting on the Cadbury Report, highlights not only the importance placed on outside directors for improved governance but also three areas of concern, namely the appointments process, the availability and the independence of outside directors. The strengths required for the role of outside director in a quoted PLC are considerable, and suggests that outside directors of listed UK public limited companies require the skills and experience that only existing executive directors of similar PLCs are likely to possess. Release by companies of their directors for outside duties raises its own governance issues. Should shareholders rather than internal management approve such appointments? Who has the right to the director’s fees, the company or the individual? Based on the response of 33 companies, this research finds that a majority (73%) have formal policies covering these governance issues but that between companies there are numerous policy differences.