CRD IV also requires firms to provide clear accounts of the way their boards work and to write annual ‘updates’ that keep track of the ways in which they govern themselves.

The intention is that no director should hold too many directorships, the better to ensure that he is able to devote enough time to his various roles and responsibilities.

Limits are being imposed on the number of directorships an individual can hold at any one time.

By 1 July 2014 the director of a ‘significant firm’ should not simultaneously hold more than the following positions:

• four non-executive directorships, or
• one executive directorship plus [+] two non-executive directorships.

Furthermore, the skills of board-members have come under further EU scrutiny and the directive requires firms to follow adequate recruitment policies in respect of directors.

These must aim to gauge their expertise, their ‘diversity’ (i.e. the contributions that their gender would make to a stable ecology in the board room) and the risks they pose to various things.

Firms are also required to ensure that board members are adequately trained and that they have devoted enough human and financial resources to the induction and training of members of their management bodies.

CRD IV stresses that each board is responsible for effective and prudent management and should periodically assess governance arrangements with a view to correcting deficiencies.

To achieve this, the board as a whole, and the individual directors, must have the right knowledge, skills and experience to perform their duties and be capable of understanding the firm’s activities and risks.

As members of the board will be required to assess each other’s skills and competence, it will be interesting to see how this works. Might it work in the same way as it does when they have to sit on each others’ remuneration committees and approve each other’s pay?

However, in relation to significant institutions, a nominations committee must be established, which should be made up of non-executive directors and will be responsible for preparing a description of the roles and capabilities required for particular appointments.

Another area on which CRD IV focuses is ‘diversity,’ which in this case entails a reasonable balance between males and females at the top.

The directive states that firms should promote diversity and should consider a broad set of qualities and competencies when selecting directors.

Each firm’s nomination committee should set a target number for the under-represented gender on the board and prepare a policy to reach it. It will have to make a record of every ‘target, policy and implementation’ exercise of this kind that it goes through and disclose the results, if any, to the regulator every year.

There is a slight contradiction here. As the main aim of CRD IV’s governance policy is the appointment of directors with the most appropriate sets of skills, gender targets might burden boards with an irrelevant distraction while they are trying to fulfil this objective.