Mind the Gap: Expectations on the Role of UK Non-Executive Directors

Notwithstanding the important role non-executive directors’ play in corporate governance and the increasing attention they receive from regulators, research on non-executives is still in its infancy. UK Corporate Governance Code does not specify how the roles of non-executive directors should be carried out, but yet the importance of such roles is crucial to the notion of governance. In conjunction with the gap of knowledge of what non-executives actually do, and the absence of a conducive environment for non-executives to fulfil their responsibilities, this may result in unrealistic expectations of their role. However, no study has previously examined the existence of possible expectations gaps regarding the role of non-executive directors. This study fills the void and reports the results of a survey of non-executive directors, executive directors and institutional investors from the UK. Whilst previous research has indicated the existence of an expectations gap regarding non-executive directors in the context of China and the Netherlands, a possible gap concerning non-executives in the UK has remained unexamined so far. This study fills the void and complements and extends previous studies of McNulty and Pettigrew (1999), Stiles and Taylor (2001) and Long et al., (2005) by considering the views of stakeholders on non-executives and providing evidence of the existence of an expectations gap. The paper reports the findings of an online survey conducted in the summer of 2012 to ascertain the opinions of British non-executive directors, executive directors and institutional investors regarding the role and effectiveness of nonexecutives. It complements and extends previous research on non-executive directors in the UK by considering the views of various stakeholder groups and providing evidence of the existence of an expectations gap.