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Despite growing concerns around the credit crunch, the annual Ernst & Young Corporate Governance survey, conducted by Ipsos MORI among the UK’s leading 500 companies, found that 35 per cent of respondents claimed that regulation and governance will be the number one challenge facing non-executive directors (NEDs) in the next 12 months.

This is followed by general economic conditions (13 per cent) and legal challenges and accountability (13 per cent). 

Environment made it onto the list of the biggest challenges faced by non-executives. This is the first time it has been identified as a major priority for this influential group of company directors.

Account for sustainability 

Gerald Russell, a senior partner at Ernst & Young, says that environmental and social issues have been pushed up company agendas in recent years, with pressure mounting for organisations to demonstrate responsibility in such areas as climate change and ethical sourcing.

“Finance and business leaders are being called upon to provide oversight on this emerging area. It is encouraging to see that they are finally waking up to the need to account for sustainability,” he adds.

Each year respondents are asked if they are more or less likely to take on a NED or audit committee chair role than they were 12 months ago.

There has been a consistent downward trend, with six times as many respondents being ‘less likely’ rather than ‘more likely’ to accept an audit committee chairmanship.

Increased risk of personal litigation 

As one respondent put it, “Getting it wrong has huge implications – you need great technical expertise to do it well.” While another said, "Increased bureaucracy and increased risk of personal litigation," was a major factor in choosing not to take on an audit committee chair role.

Russell says he is not surprised to see these strong negative responses. He points out that the audit committee chair is still the most exposed non-executive role.

“It is technically demanding and many of today’s finance leaders have been scared off from the job, quite possibly by the sharper requirements of the European 8th Directive. It certainly takes an individual with a very special set of skills to do the role – but the available talent pool appears to be dwindling,” he concludes.

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Related links

• Ernst & Young