Poor old boards. Battered and bruised by issue after issue. Not only do we have the most substantive changes to corporate governance for many years but an environment of political, technological and environmental turmoil.
The people in white coats are even suggesting that section 172, long-enshrined in the Companies Act, should actually be acknowledged and reported against as well as other socially driven agendas such as diversity.
What is the world coming to? To quote a CEO (unattributably): “Do you mean the checkout girls are going to have a say on my salary and sit in the boardroom?”
How are boards rising to this challenge? Mixed I would say. Overall, they are better at the external market challenges than the governance ones.
The discussion around gender pay reporting was difficult enough. The question of employee representation has in my experience been characterised by sighs and long-suffering looks—generally at the female non-executive who, as the perceived touchy-feely member on the board, will, no doubt, get more than a fair look in at this. Ladies, don’t do it—it is akin to the coffee-making requests of your early business days.
How well have boards done so far? I guess if they had acquitted themselves with flying colours there wouldn’t be the changes happening that there are.
Something different is needed. I want to talk about two current situations and then a little tittle-tattle to reward those who read to the end of my article.
So, Adam Crozier has recently accepted three large chairmanships: Vue, Whitbread and ASOS. The nomination committees of these companies have clearly not considered that the guidance on overboarding applies to them or their companies. Why is this?
Current best practice suggests that the time commitment of a chair of a large plc is around three days a week in order to meet the legal and ethical obligations of a chair. Mr Crozier is, no doubt, an exceptional person but even he only has a finite amount of time in a day so, taking on three roles would suggest a degree of “I know better”.
Does this exemplify the board leadership we are seeking in the current environment? Time-poor, best practice ignored, same old, same old?
In contrast, the major shareholder in Riverford Organic Farmers—a small (£50m turnover) company, 12 years in the making—has decided to make his business 74% employee-owned.
Guy Watson says: “I am convinced that people are kinder, less greedy, more creative, more thoughtful and can contribute more and be more productive than our institutions allow them to demonstrate … I want to be part of an organisation that helps us be the best version of ourselves—that facilitates and grows people, rather than undermining their humanity by appealing to ignoble sentiments, as capitalism too often does”.
In other words: “Be the change you want to see in the world”. I don’t think that boards want to change, nor that conventional chairs want to change; they think they’re fine as they are. That is why they ignore governance codes or work around them.
A discussion of chair replacement I recently contributed to was focused primarily on the need to “get on with the chief exec, otherwise we will have turmoil”. There was no discussion on leadership in times of change. Au contraire, the discussion was on finding someone who was resilient in standing up to these calls for change. Unfortunately, Mr Crozier was too busy to take the call!
To survive in this new challenging environment we need to look for non-executives and chairs that have all the old things but combine those abilities with an acknowledgment of a lack of knowing everything. The chair must have the appetite to lead the board on a journey of discovery, and the board must be up for that.
Not only a journey of discovery within the confines of one’s own boardroom but within the context of the WHOLE environment within which our public (clue is in the word) limited companies operate. If we don’t do this we will not regain the trust that is needed to operate, let alone meet the challenges ahead.
Be the change you want to see.
The Secret Ned is a British board director with 30 years’ experience on the boards of the FTSE 250, small-cap companies and private, family-owned businesses.