2.4.3 NEDs before and after the Codes: from being the "cats paws" of CEOs to holding the balance of power

In the 1980s NEDs were not generally held in high esteem. Chosen by the CEO, they were not expected to do more than attend a few committee meetings and generally do the bidding of the CEO. NEDs were modestly rewarded. The CEO dominated.1 Most boards only had a few NEDs. Generally the CEO was also the chairman of the board, but if there was a separate chairman, he would often be the former CEO, who would be powerful and could overrule the CEO. The number of non-executive directors varied widely, smaller companies having only a few and large companies having many, sometimes up to even 20. Certainly, in the laffer case this was not conducive to a productive debate.

The company secretary has always been important. He reported to the CEO and now supports the chairman.2 Annual General Meetings (AGMs) were important events, but as they were attended mostly by small shareholders and rarely by financial institutions with large shareholdings, they could be worked off quickly, sometimes within an hour.3

Since 1992 and the publication of the Cadbury Code, the UK has introduced important changes through the codes and the debates they have sparked. These changes have also been pushed by large institutions such as Hermes and organizations of investors and pension funds. The UK has in fact taken the lead in the corporate governance debate around the world. One factor has been that important business leaders who combine idealism with the capacity to think and write at an academie level have developed the code system with its "comply or explain" principle and high aspirational concepts, which have been followed in most places around the world. Since the introduction of the Cadbury Code, NEDs have been in the majority on boards and their responsibilities have been extended, while the positions of CEO and chairman have been separated. Now there are real differences between the two positions: they have become more of a complementary tandem, equal but different.