Smaller quoted companies are failing to get the most out of their non-executive directors, according to a new report.

Smaller quoted companies are failing to get the most out of their non-executive directors, according to a new report.

The research into the role, remuneration and responsibilities of non-executive directors found that their effectiveness and independence was being undermined by the companies they serve.

The survey was conducted by law firm Speechly Bircham and the Quoted Companies Alliance (QCA), which was established to support the interests of small and mid-cap companies.

The report concluded that smaller companies fail in four areas: remuneration, evaluation, training and effectiveness. It found that 14 per cent of non-executives were paid in share options, which is against the Combined Code and the QCA guidelines for smaller quoted companies, while 42 per cent received no formal evaluation of their performance, a requirement of the Higgs review.

It also discovered that a significant, but undisclosed proportion felt their knowledge of pensions and corporate social responsibility were inadequate with more than a third claiming they were not receiving papers early enough for board meetings.

One positive point from the research highlighted that AIM companies benefited from a smaller pool of non-executives, who worked harder than their Main Market counterparts.

QCA chief executive John Pierce said effective non-executive directors are key to a quoted company’s performance. “But whatever the level of effort, it is critical every quoted company ensures that their non-executive directors are able to carry out their duties as effectively as possible.”

Speechly Bircham head of equity capital markets Tom Shaw added: “Performance without evaluation, remuneration policies linked to share options or simple lack of basic knowledge of key areas of regulation can jeopardise the independence and effectiveness of non-executive directors and increase the chance of the wrong decisions being made.”