This survey from Tomorrow's Company starkly sets out the ultimate problem with the current governance focus. This report shows that rather than their knowledge and experience being used to shape a company's strategy, independent directors instead are being used to box-tick executive produced reports.

Why is this?

One needs to go back to the origin of the NED. They were created by investors, between the world wars, because investors could not focus on all their investments. They were the investors' eyes and ears. Their role was not to add value via their outside knowledge and contacts. They were there to report back that all was well.

This continued post-WWII right up to the deregulation of financial markets in the 80s. The good and the great remained NEDs rather than being appointed from complementary industries and businesses.

Then with deregulation a new type of NED was created. NEDs started to become people who might have relevant experience, might shape a strategy and might use their experience to assist executives. 

This golden age of NEDs saw companies actively courting experienced NEDs who were not investors' puppets but instead had relevant business experience, international contacts and complementary strengths and capabilities. Companies started to focus on the right mix and diversity of NEDs.

However the golden age has faded and NEDs have reverted to type.

Regulation and duties have taken over again. It could be anti-trust, health and safety, cyber risk, bribery...the list is endless. 

NEDs have become too worried about reputational risk. Business opportunity has become a side issue.

Internal audit and compliance programmes dominate board rooms so NEDs spend all their time ensuring companies and executives are compliant rather than assisting executives on strategy and growth opportunities.

This sad state of affairs needs reversing. 

NEDs must have a governance role and compliance function but its up to investors to set criteria around NEDs' ability to assist on growth and strategy. Where companies can't demonstrate this mix of NEDS, investors should step in and focus change.

Companies are missing out on valued business adviser NEDs by creating board agendas focused on risk rather than opportunity.