Roundtable march 2011

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Roundtable march 2011

  1. 1. ICSAIssued as a supplement to CHARTERED SECRETARY March 2011A widerviewHow can we make boardroom diversity happen? In association with
  2. 2. The 3rd ICSA Corporate Governance Conference 16 March 2011 Congress Centre London WC1 The age of accountability This year’s conference will examine what lies ahead in corporate governance following the work on the new UK Corporate Governance Code and other regulatory measures, and asking what it all means for corporate accountability and transparency. The conference programme will look in detail at the conclusions of the work on improving board effectiveness, and at regulatory moves from Europe. Conference chair: Anthony Hilton, Financial Editor, London Evening Standard Keynote speaker: Sir John Egan, former Chairman, Severn Trent Plc Other speakers: Peter Butler, Chief Executive, Governance for Owners Lutgart Van den Berghe, Chair, Policy Committee, ecoDa Alison Kennedy, Head of Governance Engagement, Standard Life Investments Frank Curtiss, Head of Corporate Governance, Railpen Investments Philippa Foster Back, Director, Institute for Business Ethics Find out more about this year’s conference Richard Anderson, Deputy Chairman, Institute of Risk Management Sallie Pilot, Director of Research and Strategy, Black Sun Corporate Reporting and see the full programme at www.icsacorporategovernance.co.uk. Programme highlights Building better boards – The new guidance on improving board effectiveness is almost upon us. So what does it say? Secure your place today! Conference Hearts and minds – Is ‘comply or explain’ under threat from Brussels? And prices start from £330 + VAT. Contact the would that be such a bad thing, anyway? ICSA Events team on 0845 850 4272 or 020 Practice, pitfalls and good PR – The relationship between good disclosure 7612 7032 or e-mail events@icsa.co.uk. and good governance is key – but what should companies disclose, and how? Perspectives on stewardship – We look at what the new code means for companies and investors. Don’t forget, ICSA Members and affiliates save a further 10% and ICSA students save a further 40% on the full conference price. Sponsor: Supporting partners:6 hours CPD accredited: ICSA, Solicitors Regulation Authority, Bar Standards Board, PMI & ACCA
  3. 3. Welcome In association with A wider view» EditorialEditor: Rachael Johnson020 7612 7094rjohnson@icsa.co.ukAssistant Editor: Gareth Pearce020 7612 7038gpearce@icsa.co.uk The fifth Chartered Secretary Roundtable discusses board composition,Senior Graphic Designer:Mareike Schulz constituting a timely debate of an issue which is currently high on the020 7612 7046 political agenda.mschulz@icsa.co.ukE-mail for editorial Fundamentally, attendees acknowledged that progress towards greaterenquiries only: diversity has stagnated, and that something needs to be done. With thatrjohnson@icsa.co.ukgpearce@icsa.co.uk in mind, there was strong support for quotas as an option that has the strength of purpose to challenge the status quo. Other alternatives, such as» Advertising and reporting on diversity and greater scrutiny of the recruitmentsponsor enquiriesSponsorship Manager: process, were also considered.Sunil Singh020 7878 2327 The topic is a wide and varied one. As such extensivesunil.singh@tenalps.com debate around it is required in order to identify anTen Alps Media effective method to bring about change. In this contextCommonwealth House the roundtable discussion was very useful for airing1 New Oxford Street what is a fascinating debate.LondonWC1A 1NV» Publisher’s note Rachael JohnsonChartered Secretary Roundtable is Editor of Chartered Secretarypublished by ICSA Information &Training Ltd for ICSA International. rjohnson@icsa.co.ukOpinions published herein are thoseof the authors and participantsand unless stated otherwise do notnecessarily reflect ICSA policy.ICSA and ICSA Information &Training accept no responsibilityfor loss occasioned in any personacting or refraining from action as Welcome to the first Roundtable of 2011, which focuses on the very topicala result of any views expressed in theme of board composition.these pages. All material publishedherein is copyright of the publishers The Financial Reporting Council requires that boardsand may not be reproduced withoutpermission. consider diversity and composition. Within this supplement a group of industry experts exploreAll advertisements appearing in these why this is still an issue, why we do not have muchpages are as far as possible checkedfor accuracy, but persons accepting or diversity on our boards and finally how we can makeoffering to accept goods or services this happen.contained in any advertisements do soat their own risk. Diversity was deemed as being much widerPhotography of Roundtable event by than gender and caused some interestingSimon Wright Photography: viewpoints and opinions, which I hope youwww.simonwrightphotography.co.uk will find insightful.Venue for Roundtable eventsupplied by 16 Park Crescent:www.16parkcrescent.co.uk Wayne StoryICSA Information & Training Ltd, Chief Executive of Equiniti16 Park Crescent, London, W1B 1AHPrinted by: Warners Midlands plc,The Maltings, Manor Lane, BournePE10 9PHThis publication is printed by Warners Midlands Plc who are fully certificated to ISO.14001:2004. This is an internationally recognised standard of excellence in environmental management. w w w . c h a r t e r e d s e c r e t a r y. n e t 3
  4. 4. Board composition Hurdle practice Rachael Johnson considers possible solutions to the current stagnation in developing diversity in the boardroom, asking if there is more that the company secretary can do. I n recent issues of Chartered symptomatic of a board’s desire to Secretary we have made recruit members in its own image. the case for greater diversity The conversation naturally focused in board composition. The on the gender issue as the group evidence suggests that having recognised that because this issue is a more diverse board boosts currently the most high profile, it might the financial performance of a act as a catalyst that eventually brings company. In practice, however, change change in other areas. The idea of is proving slow to materialise. There quotas was met with more enthusiasm must be barriers in place that are than they sometimes receive from preventing change, but what are they other groups; there was an awareness and how can we overcome them? in the room that ‘something has to With this in mind, the fifth give’. However, a word of caution Chartered Secretary Roundtable was was sounded in relation to tokenism, held to discuss the topic of board as the argument was made for more composition. The discussion raised than one woman to be present in some interesting issues and opinions. the boardroom. Indeed, the 30 per Attendees thought that one of the cent target was highlighted as a good reasons companies might be wary yardstick to aim for, avoiding tokenism of appointing someone who falls and acknowledging that not all women diversity might make reporting as a outside the standard director mould behave in exactly the same way. whole more compliance-based, rather would be the market’s reaction to than strategic. An alternative might such an appointment. It may be that Taking the right steps be to consider a shorter tenure for companies are reluctant to cause a One of the key questions the group directors, or to perhaps use personality stir and frighten potential or existing centred on was, ‘What can be done?’ profiling in recruiting directors, or investors. However, it was asserted Reporting was considered as an at least have a more instructive that the idea that there is a certain ‘fit’ option. The argument for reporting relationship with the headhunter to for a particular board, which makes was that it often drives greater make sure that the board sees all some candidates more suitable than behavioural change than any other qualified candidates. Fundamentally, others, should be challenged. Such solution, the argument against being it was acknowledged that chairmen a notion is too vague and is often that a requirement to report on need help in making their boards more4 w w w . c h a r t e r e d s e c r e t a r y. n e t
  5. 5. In association withdiverse; some are not closed to thepossibility, but need to be shown how There was an awareness in the roomit can be achieved. Might there be a role for thecompany secretary here? Indeed, at that ‘something has to give’.the very least, the company secretary’srelationship with the chair should be what is to stop them from taking a question of widening ambition assuch that he or she can advise on the on a non-executive role at another much as anything else. benefits of diversity and persuade company? Their unique understandingthe chair to consider less predictable and experience of boardroom » About the authorcandidates. But perhaps company procedure and function make them Rachael Johnson is Editor ofsecretaries should be thinking bigger: a perfect candidate. Perhaps this is Chartered Secretary magazine. w w w . c h a r t e r e d s e c r e t a r y. n e t 5
  6. 6. Board composition Meet the 4 6 panel 1 2 3 5 1. Maggie Heasman Head of Corporate Affairs, Chartered Institute of Management Accountants (CIMA) In addition to her role as Head of Corporate Affairs at CIMA, Maggie is the Membership Secretary of the Association of Women Chartered Secretaries, an ICSA Members group, which aims to provide professional support and networking opportunities for female ICSA Members and students. 2. Janet Cooper Company Secretary at Amersham for Society, Peter has worked for more Partner, Linklaters (Chair) five years prior to its takeover by GE in than 25 years in the share registration Janet has been a Partner at Linklaters, 2004 and at Prudential for four years. industry. Peter is Chairman of the ICSA a global law firm, for 20 years, and She joined Smith & Nephew in May Registrars Group, and is a member of has been one of the longest serving 2009 as Company Secretary. the Company Secretary’s Forum, the global practice heads. Janet sits CBI Companies Committee and the on a number of boards, including 4. Peter Swabey Shareholder Voting Working Group. UNWomen, which is the United Company Secretary and Industry He is a regular speaker at industry Nations organisation that works to Leadership Director, Equiniti conferences and events, with an empower women globally. Peter is the external face of industry-wide reputation as a technical Equiniti and responsible for the expert on shareholder and corporate 3. Susan Henderson development and support of all the governance matters. Company Secretary, Smith & Nephew share registration and corporate Susan Henderson MA FCIS has 25 governance services offered by 5. Julie Bamford years’ experience as a company the company to its clients and Joint Head of Policy, Corporate, ICSA secretary in a wide range of their shareholders. This includes Julie Bamford recently joined ICSA businesses, covering board support, the company’s engagement with as Joint Head of Policy, Corporate. corporate governance, corporate market, government and regulatory Prior to that, she spent six years with transactions, share registration, contacts; representing registrar and Standard Chartered as Deputy Group listing obligations, corporate social issuer interests on industry bodies; Secretary. She has more than 20 years’ responsibility, pensions, insurance and managing Equiniti’s responses experience working as a Chartered and employee and executive share to formal and informal consultations. Secretary in the financial services plans. She has held various company A history graduate, Fellow of ICSA, sector, initially in life assurance and secretarial positions, including Deputy and member of the Investor Relations pensions, then in investments, before6 w w w . c h a r t e r e d s e c r e t a r y. n e t
  7. 7. In association with 8. Robert Armour Director, David Venus & Company Robert Armour became a Director of David Venus & Company last year, joining the practice after many years as Company Secretary and General Counsel of British Energy Group plc, a FTSE 100 company until its acquisition 8 by EDF SA in 2009. Following a career in private legal practice, Robert spent almost 20 years as company secretary 7 of significant companies in the energy sector and has experience of the issues 9 facing any company secretary sitting round the board table or acting as a director of regulated businesses. Robert was in-house counsel of 10 the year in 2005 and awarded an OBE in 2007 for services to the electricity sector. Based in Edinburgh, Robert chairs the Scottish Council, Development and Industry and is an advisor to Equiniti and EDF Energy. 9. Caroline Evans Director, CSS Caroline is Director of CSS, the specialist company secretarial recruiter, and its parent Beament Leslie Thomas. Her early career was as a tax consultant with two of the ‘Big 4’ firms, before she moved into recruitment. Initially specialising in management consultancy appointments, she transferred to leadmoving into banking. During this time, He is a former visiting Professor at the team at CSS some ten years ago.she has experienced many challenges both Warwick and Cass Business Caroline has a particular interest in thein the financial services industry, from Schools. He is currently National growth and development of companypensions mis-selling through to the Chairman for the Campaign to secretaries and is committed to raisingvery recent banking crisis. She has also Protect Rural England (CPRE). the profile of the profession at theworked through the many changes highest levels of the business arena.in the regulatory environment and to 7. Lorraine Youngcorporate governance best practice Chartered Secretary in Public Practice 10. Kerry Porrittthat followed. Julie is a Fellow of ICSA, Following a long career in the City, Deputy Secretary, Severn Trenthas a first degree in law from the Lorraine set up her own company Kerry qualified as a CharteredUniversity of London and a masters secretarial practice in 2003. This Secretary and initially worked withindegree in Corporate Governance. provides individually tailored and the investment banking industry. From flexible advisory services for a variety August 2003 until December 2006,6. Peter Waine of client companies. Lorraine is a she was Deputy Company SecretaryDirector, Hanson Green policy advisor to ICSA and a facilitator of Brambles Industries, a FTSE 100Peter has worked for manufacturing for its board evaluation service. She global support service provider withcompanies and professional firms, is a regular speaker for ICSA training an Anglo-Australian dual listedboth as a director and a non-executive courses and writes for Chartered companies structure. Since 2007, Kerrydirector. A former CBI Director, he Secretary magazine. Lorraine has has held the role of Deputy Secretaryacquired Hanson Green with Barry over 20 years’ experience as a of Severn Trent, a regulated FTSE 100Dinan in 1989. He is co-author of Chartered Secretary, including as utilities group. In 2010, Kerry wasThe Independent Board Director Company Secretary at Brambles appointed a Court Assistant to theand Takeover, the business novel, Industries and Head of Secretariat Worshipful Company of Charteredand author of The Board Game. at Standard Chartered. Secretaries and Administrators. w w w . c h a r t e r e d s e c r e t a r y. n e t 7
  8. 8. Board composition A wider view We know that greater diversity of board composition makes sense, so how can we make it happen? Janet Cooper: The topic for today’s roundtable is diversity There’s probably about 30 per cent female representation on boards. The Financial Reporting Council (FRC), in its UK on executive teams and 12 per cent on boards. Somehow Governance Code now requires that boards consider their women haven’t passed the threshold into the boardroom. diversity, looking particularly at gender. Why is this still an I think this may be partly due to other factors, such as issue? Why do we not have much diversity on our boards boards looking for people who are already on major boards. and particularly lack women on boards? It’s been a very slow evolution so far in increasing the proportion of women on boards. Peter Waine: I think there’s still not enough women, even at the executive committee level, to consider. Even if Peter Waine: There aren’t enough people on current one’s going for the plc, the sort of corporate entity, taking plc boards, especially the executive side, to satisfy the diversity one step further from the traditional cadre of talent. non-executive requirement. Therefore they are having to The graduates have been coming out 50/50 for many years. look below main board level. I think diversity will help to But somehow there’s not enough people for headhunters to break that rather cosy feeling that boards have, like a put forward. I feel that the vast majority of companies would little club with the same members. Plc main boards are like to have more women on their boards. It comes down to now rather small as far as the executive is concerned and whether we can offer them the right quality candidate. they can only have one non-executive position while they are still currently an executive. I think they’re not Robert Armour: I think that Cranfield said in its report just going like-for-like within their own cadre of plc that there are about 2,800 women at the next level. main board.8 w w w . c h a r t e r e d s e c r e t a r y. n e t
  9. 9. In association withRelevant experience encourage them in that direction. Another factor to consider is what the reaction to an appointment will be. How will the market react to an appointment; how will the financial pressJanet Cooper: So what’s so special about being on the main react? Companies will want a wow factor which promptsboard that’s essential to becoming a non-executive director? people to think: I know that person, I know their track record, they’re going to be a well-received addition. ThatPeter Waine: The buck does stop at the main board in a sort of person is often a safer choice.plc structure as far as strategy and budgets are concerned.I think it’s a concentration in the plc structure at least Kerry Porritt: I agree with that, certainly from what I’vethat makes it difficult for people outside that structure to seen in the guidance coming through. It’s very muchunderstand certain elements of a board’s agenda. Which around looking for people who have got sector experience.also means that you’ve got to be a generalist rather than I think sometimes it’s difficult for people to look outsiderepresent each function. There’s quite a lot of psychological a particular remit, especially in financial services at thedifference as well. moment. That makes it hard for people to say: are there other people out there in the public sector or in publicJanet Cooper: Looking at the availability of talent out there, service, such as judges, who are sufficiently challengingdo companies look at the public sector, where people have and who have a different mindset that would be a good fitrun very significant departments and where there tends to around the board, because these people may not have thebe a slightly broader, more diverse group of candidates? right experience of the plc sector.Lorraine Young: I’ve seen several boards which have former Peter Waine: We make about 100 appointments a year,male civil servants on them. Such people can be very sought which we’ve been doing for over 20 years. I don’t thinkafter, particularly those from the treasury. But I’ve not seen we’ve placed a single civil servant, nor has it been requested,this as much with female civil servants. nor have we been able to push for it, despite the talent that there is there.Susan Henderson: If you look at the age of people whowould be suitable as non-executive directors, they’re Lorraine Young: Why do you think that is? It does seem,probably in their 50s. Although there is a 50/50 split of from reading the papers recently, that people are tryinggraduates now, if you look at the split of graduates say 30 to pull back on the size of their boards. And you canyears ago, when these 50-year-olds were coming out of understand that, but I think that could actually count againstuniversity, that split would have been a lot different. There diversity. You know they want somebody who they perceiveare other issues, such as that some women will drop out to as safe, that they can be confident in, and this is the reasondo other things. However, that still doesn’t get back to 12 why the executives want someone who can hit the groundper cent being a sensible number. running. They’re less inclined to say, well they’ve got suitable In terms of diversity being more than just a gender issue, personal qualities, as you might have said about the civilI think that looking at public sector is valid. To get a proper servants. They’re not willing to put the time and energy in tobalance of board members you will want some members train them, or to take the risk that they might fail.to have had that range of plc experience, so that theyunderstand the difference between a big division and the Susan Henderson: I would like to ask Peter; do companieslisted company environment. It is also valuable to have a say, ‘we’re wanting somebody that’s been the chiefwider balance, with say people from the public sector who executive or COO somewhere’, or do they specify that orlook at some things and say: ‘You’re looking at it from a do they specify the qualities they should have. For example,listed company perspective, but actually I’ve got a different someone who is going to be challenging or with a wideperspective, which may also be relevant.’ range of experience’?Janet Cooper: In terms of the companies that you’ve Peter Waine: Yes. It’s experience of having been on theworked for, do you feel there was a supply issue, that main board that they are looking for, rather than necessarilythere weren’t enough women or people from different having been Finance Director. They need to be financiallybackgrounds available to be promoted within your competent, although there are a few non-executives whoorganisation or to get external, senior appointments? aren’t as financially competent as you might assume, having been on the main board. I still think that’s a problem. ButRobert Armour: I think there are two things to consider. no, they don’t tend to say they want a chief executive orIn many cases there are good women on the executive former chief executive. In fact we would often cautionmanagement team. But they may be in roles which against a current chief executive, because they are so busytraditionally don’t go forward to the main board, such as at that stage, running their company and they’re notHR Director. Perhaps it comes back to the fact that there shrinking violets. The combination of the two makes it quiteare a limited number of executive slots and a reluctance to difficult for them to adjust within three or four hours toput people below main board level onto other boards or to becoming a non-executive. w w w . c h a r t e r e d s e c r e t a r y. n e t 9
  10. 10. Board composition concentration on evaluating the effectiveness of the board, which may make people see that they don’t necessarily need what they traditionally thought they needed. Peter Waine: With some of the board evaluation exercises that we’re currently doing, there has been a sort of reflective moment by the board or by the chairman on what is really needed. Sometimes we find boards are saying that they don’t really know each other. They meet at nine o’clock, and finish at three. It tends to be the global companies whose boards actually know each other because they travel together. I think that there’s a need for companies to bond and understand each other and spend more due diligence on chemistry and corporate cultures. Julie Bamford: I think that when a lot of executives first go onto the board that is when they may have real difficulty focusing on the whole company, rather than just their own area of operational responsibility. Some training would help; directors have induction training when they come on the board, part of that should focus on their legal responsibilities. To dismiss people who haven’t had board responsibility in the past is, I think, a bit narrow. Quotas ‘Do companies look at the Janet Cooper: When Norway looked at this in 2001 they public sector?’ introduced a quota to get 40 per cent of women on boards and they found a supply very quickly. This was because, Janet Cooper if they didn’t, their companies would be liquidated within two years. No company was liquidated, because they all complied. Does that mean that Norwegian companies are Julie Bamford: We hear the term ‘fit’ a lot. However, now operating at a suboptimum level because they don’t there’s a feeling that maybe boards need to change their have the right talent onboard, or was the talent actually thinking. Major investors always comment on appointments there when they went looking for it? and like to see a ‘track record’. Headhunters tend to follow the company’s lead, which they should avoid doing, so Peter Waine: I don’t like quotas; I think they’re going that boards don’t automatically get what they think they to be counterproductive. I know something needs to be want. There should be more of a discussion around board done to smash this glass ceiling. Certainly a number of our composition, to broaden people’s thinking, because this appointments have been women and the number of boards question of ‘fit’ comes up all the time. And nobody can ever that are asking for women is increasing. I can’t believe quite pin down what they mean by ‘fit’. It always seems to that companies have been so naive as to not seek talent mean that the idea they’ve got in their head is of someone wherever they can find it. It’s just that they haven’t been like themselves. Everybody needs to get together and flexible enough or open-minded enough to take one or two broaden out their thinking on this. women onto their boards. In a small economy of a country like Norway the standard must have dropped and that is not Peter Swabey: It often seems to me that perhaps good for really talented women. somebody who doesn’t ‘fit’ is actually more appropriate. Janet Cooper: I’m not aware of any research showing Lorraine Young: It’s back to the ‘groupthink’ problem. anything yet, because they say it’s too early to identify whether it has had a positive impact on performance. Julie Bamford: Yes, in many ways diversity means ‘not fit’. The two terms are contradictory. Caroline Evans: I’ve read that Norway has exceeded its quota, which suggests that the quota has created the Peter Swabey: For me, awareness of board diversity may opportunity to view potential board members in a different develop with the requirement for external board evaluation, light and to assess them differently. Maybe the mechanics of making that requirement quite positive. There will be greater assessing someone’s suitability have to be altered.10 w w w . c h a r t e r e d s e c r e t a r y. n e t
  11. 11. In association withKerry Porritt: I agree that it’s too early in the cycle to and I’m on your side. I’m a woman, on a plc board andproduce any results as to whether the quota’s working. A the shareholders seem to be happy – there’s a much moresecond interesting point is that getting one woman on the promising story to tell.board tends to be quite ineffective, because that person isalways seen as being a female representative, or the ‘woman Lorraine Young: Maybe you touched on something theredirector’. Having two or three women on a board of, say – there’s a lot of fear out there. What you said aboutten, is far more effective because then they become part changing the chairman struck me. How do you do that?of the usual debate; they’re no longer seen as the token. I’ve changed my mind a bit in my answer to that. I startedAlthough I don’t agree with quotas, in going to 30 per cent, off in the camp of let’s not have quotas; we’ve all got to getyou do away with the idea of the token woman on the there on merit. But actually if quotas are imposed after thisboard. I do wonder whether that’s going to have a positive call for evidence it may not be such a bad thing. If you lookeffect in Norway, because they have more than 30 per cent, at the numbers and how long it’s taken us to get not veryrather than just the one woman at the table. far, what is it that’s going to change the people that run boards to make them come out of their comfort zone andPeter Waine: But even having one woman on a board choose different people?does change the logistics, the dynamism of that board.That’s the feedback we get. I still feel that a more subtle Julie Bamford: As you say, the mechanics of theapproach can be more effective. In the UK corporate appointment process are important here. If we go forscene that’s not quotas, but what’s been hinted at: quality quotas we may have a couple of years of disruption andinduction. Not just a half-day, but over a whole year in then things will settle down, because the culture of boardsdifferent formats. The attitude of the chairman of that will change. What they are looking for will change. Whatboard is also important, because after all it is his or her they see as ‘fit’ will change. The momentum will build.board. That can make a huge difference to the remit and I don’t have a strong view either way on quotas, but I canthe instruction that people like ourselves are given and the see the argument for them.effectiveness of the appointment. Robert Armour: I think you’re right. Personally I’m inKerry Porritt: I think that talking specifically around gender favour of quotas. I think the European average is aboutand the diversity of boards could be a potential red herring. 12 per cent; it’s not that far off ours. I read that it wouldWe all know as women sitting around this table, that we’re take, at the current rate of progress, 70 years to getall different and we work in very different ways. It’s not to parity. We’re not going to get there in a reasonablealways the case that if you have just one woman around timescale without some pressure. Whether you go witha table, that she will work differently to the men. If she the Norwegian model of 40 per cent or not, it seems tohappens to have a lot of male characteristics, actually she me that you may need to take a leap of faith. Part of thewon’t. That’s not because she’s a woman, it’s because her reason you want diversity is to avoid groupthink. I think thattraits are that way. So actually, in the same way that five part of the problem is that there’s groupthink out there thatmen around the table will all act completely differently says, ‘we can’t take the risk of widening board composition,because they’ve all got different characters, I think it’s quite if we widen it from the collective usual suspects we aregeneric to say that a woman has to act ‘like a woman’. going to dumb-down the board.’ Actually you’re going to change things, but it’s that leap into the unknown, which isJulie Bamford: I think you’re right. Bringing diversity to seen as risky, but which may not actually be any worse thanthe board is as much about diversity of thinking. An example the current situation. Most surveys of the UK populationis appointing a lawyer to an audit committee. A lawyer find that they would like a more gender reflective boardcomes with a different perspective and thinks about things structure than we currently have.in a different way. It’s the different ways of thinking thatboards need. Julie Bamford: That’s important as boards have to reflect their customer base. If they haven’t got that thinking atCaroline Evans: Peter, when you said that when a woman board level they become detached from their customers.comes onto a board things start to happen differently. Is thatreceived as positive feedback? Janet Cooper: The Catalyst survey in 2007 said that companies with more than three women on the boardPeter Waine: Completely positive, if the women come to outperformed others by 83 per cent. In terms of the fearthe board as themselves the feedback is that the board will of appointing people who may not tick all the right boxes,be different. It’s perceived to be different even before the those companies that have taken that ‘risk’ now seemappointment’s made. If the women that we have placed to be outperforming as a result. How do we improve theon boards in the last 12 months were here they would say, talent base, so that this fear can be removed? Do youdon’t get hung up about this, or worry about that, you’re think initiatives by Centrica, Unilever or Vodafone, who willthinking too academically, too subtly. We’re actually on a always put a woman on the shortlist for senior executiveboard and I can see how things are beginning to change appointments, are going to improve the talent base? w w w . c h a r t e r e d s e c r e t a r y. n e t 11
  12. 12. Board composition Caroline Evans: I think the talent is there but that it may Robert Armour: Of the people who come to you, Peter, be dangerous to put a woman on a shortlist in order to asking to be considered, how many are women? If they fulfil a requirement. I think the measures of talent and the don’t come forward by themselves, how do you find female professional development programmes should all be looked candidates? Because taking Maggie’s point, if they don’t put at and perhaps altered in order to make them fairer across themselves forward because they think they’re not going a more diverse range of equivalent, but differently manifest, to get through and the statistics say there are less jobs for talent. The ‘traditional’ talent is readily measurable against them, then they’re not going to try, in case they fail. It’s a ‘traditional’ criteria; the diverse group should be measured vicious circle. differently. Perhaps we need to be more sophisticated in the way we measure people’s capabilities and potentials. Peter Waine: A number of people do write in. Secondly we get chairmen and non-executives who say, I think this Peter Waine: I think that the Unilevers and the Vodafones person on our board should be considered, which is very will have a huge female talent pool. Perhaps some of the useful. They’re not always recommended from their own companies at the latter end of FTSE 250 may not have the board even, they could be recommended from a board that sufficient depth and variety of talent because they won’t they’re also on in some other capacity. We do back certain attract that number of world-class people. Even at board candidates we believe passionately in. Sometimes we add level they only have one or two real stars. Unilever and them to a list and say, they’re not quite right for your direct similar organisations will get the best from universities and specification, but they should be considered. They tend to should keep most of them. I think their trouble is that they see that extra one, because it’s pretty pointless for us to have too much home-grown talent and not enough diversity propose that person unless there’s some real benefit. of experience. So they think they’re doing well compared with internally set yardsticks, but the competition isn’t Robert Armour: Would that extra person you put forward standing still. That makes their people pretty useless as non- actually be somebody appropriate from a diversity angle? executives elsewhere, because they say the only way to do things is the Unilever way of doing things, which is not the Peter Waine: I was thinking mainly about women in that case. So it’s not quite as crisp and as neat as sometimes the particular category. But actually it’s not only women; nor arguments or the articles convey. should it be. You talk about lawyers, especially within regulated industries. I still find that financial services is a Janet Cooper: It seems a powerful step forward, that the big, big problem when it comes to having a genuine desire chief executive or the chairman in these firms has been to have a balanced board. But certainly lawyers are very saying, right we’ve got a lot of women at the lower level, but good for regulated industries, the utilities and so on and virtually nothing at the top of the pyramid. But the process we’ve made some exciting good appointments there. In turn that they are using to get people to the top won’t equip that’s helped that candidate to broaden into a more general them with the right talent to be moving into other businesses. portfolio of non-executive positions outside regulation. Confidence Reporting and the Maggie Heasman: Is there something to be said around nominations process the fact that women don’t feel they can do it? That they stop at a certain level and they’re not encouraged further. Janet Cooper: In terms of the nomination process, how are Perhaps they’ve gone through an education system where, if the specifications for these board positions put together? you’re in your 40s or 50s, you’re not encouraged to progress Are the required characteristics predominantly male, so that up the ranks and so you don’t feel you can do that. You’ve it’s a self-fulfilling prophecy that a man will be taken on? got the talent, but no one has ever encouraged you. So you hold yourself back. Peter Waine: I don’t know. Being a man, I’m not sure if I can see through what is actually presented to me Lorraine Young: I think confidence is a huge factor. When sometimes. I’m not aware that they’re doing that. But I I ran a department and was recruiting company secretaries am aware that they’re wanting, where possible, a woman I found that you could interview a woman and a man on the board; it’s definitely what they’re asking for. It’s who were reasonably equally qualified, but, in general, the inordinately slow, but I do believe the momentum is there. woman would be far more modest about her achievements and what she could do, than the man. Yet on paper the Susan Henderson: When I went to New York, I went to woman may have been better, or the candidates would have Ellis Island, where they had processed everybody coming been at least the same. into the US. The tests they had used to decide if you were an acceptable person to live in the US tested aspects that Janet Cooper: Do you feel that women are not putting were completely alien to people coming say from a rural themselves forward; that they’re waiting to be asked? Eastern European society. They now recognise that the kind12 w w w . c h a r t e r e d s e c r e t a r y. n e t
  13. 13. In association withof questions they were asking were unfair, because theywere not taking account of a different range of skills andexperiences. I wonder if there’s something like that going onsubconsciously in the process of board appointment.Julie Bamford: I think this links in to what Maggie wassaying that women who are in their 40 and 50s now maynot have been brought up to push themselves forward andto strive for those kind of careers. They’re also dealing withmen of that same generation, who were brought up to seewomen in this way. Often they don’t realise how they arethinking, what they are saying, or what they’re doing.Janet Cooper: In terms of the FRC UK CorporateGovernance Code, which says you need to describe thenominations process in appointing new directors, are yougoing to be putting more information about the nature ofthe nomination process in your reports this year?Susan Henderson: I did it last year. We had two new non-executive appointments. We were looking for one to takeover as chairman of the audit committee. The headhuntersaid to us: ‘here are some audit committee possibilities, butthere is somebody else we think you should see as you’re ascientific company and innovation is your thing. This personcomes from a scientific background. That person was awoman, who brought diversity along with an innovative,scientific point of view, without the conventional financialor plc listed background. She’s brought diversity when weweren’t specifically looking for it, but we were open to thesuggestion. It is important for a board to define what it islooking for, but also to be open to something else as well. ‘There’s a lot of fearJanet Cooper: When you appoint women to the board, out there.’is one of the first committees they join the nominations Lorraine Youngcommittee? Doing that might enable us to try and breakdown this tendency for people to appoint in their ownlikeness and to accelerate the consideration of diversity in change behaviours, so the more reporting we can have, thethe recruitment process. better, perhaps with companies setting internal targets and reporting on how they are working towards their goal.Susan Henderson: I tend to see nomination committeescomposed of people that have been on the board a bit Janet Cooper: If one of the outcomes of Lord Davies’longer, who know how the board works. committee is that there will be more reporting on diversity, throughout the organisation, this will fall within your remitRobert Armour: I don’t think people say, right we’ll put a as company secretaries. Do you think that level of reportingwoman on the nominations committee, as such. You have would be a good thing?your list of non-executives and you sit there and say, howam I going to allocate them? Let’s start with the chairs Kerry Porritt: Although reporting is a good thing that canfor these committees; have they got experience of that drive a change in behaviours, I think there is a problemparticular field? Then how do I divide them up to get the with that approach. From my perspective, the danger isright balance of skills and approach? By the time you’ve got that the more obligations of this kind that come along theto that stage you know the personalities around the table, more likely it is that corporate governance will becomeso you know how they’re going to fit. very compliance-based, instead of being very strategic. The ICSA guidance says that the composition of the board isJulie Bamford: I think your point on reporting is very the chair’s vision and the chair should be feeding that intoimportant. Companies should report on their nomination the nomination committee. If the chair’s vision isn’t a veryprocess. This links into the evaluation process and focusing good one, or if there isn’t a process in place to define howon this issue as part of board evaluation. Reporting tends to the company should align board composition to its strategy, w w w . c h a r t e r e d s e c r e t a r y. n e t 13
  14. 14. Board composition then I don’t think the nominations procedure will ever really launch of its report in December last year. It was suggested change. I also think we should consider the terms of usual that these appointments should be on a website or at employment. If you appoint somebody to the board, they’re least become more public. One or two companies thought usually on there for at least three years, maybe six years or that was a good idea. Do you think doing that might add even nine years. How do you know you’ve got the right value in bringing out more people who will put themselves person? It’s usually within the first six months that you know forward, or will it actually just cause more work? if it’s working. Maybe personality profiling is something that the whole board needs to undergo, or maybe there is a Caroline Evans: I think it depends on how the applications need for probation periods and coaching. Currently there is are reviewed and whether people look at them in the induction and development, but is that enough? I wonder if traditional light or look at them in a slightly more lateral the appointment and retention process for directors on a plc light. If they are looked at in the traditional light then board is too one tone. perhaps the end result will be the same. But if the process of sorting is adapted, then yes. Peter Waine: If we’re not careful, with all these reports, corporate governance will become an industry; an end in Kerry Porritt: You could put the advert wherever you like itself. I think that’s where you, as company secretaries, play really, couldn’t you? But unless that advert is asking for the a huge role. When I talk to chairmen, the successful boards right things, you’re never going to find the right candidates are those where they don’t have to say, ‘we spend a lot of to review and, in the end, get the required mindset. You time talking about corporate governance’, because they’ve need to ensure that the advert fits with what you’re actually got a good company secretary who tells them exactly what looking for. needs to be done. I think that’s a very powerful relationship between the company secretary and the chairman; even the more liberal, open minded chairmen need help. I think it is Action plan important to emphasise chemistry but I think that profiling would be a bit too difficult for some chairmen to take. Janet Cooper: What do we think businesses need to do, or the Government needs to do, to try and move this diversity Robert Armour: There is something in looking at the issue on to the next level? We can’t carry on doing what process that’s important. The public sector has a much better we’re doing, with 12 per cent on the FTSE 100 and 7 per balance of appointments, with almost 50 per cent of boards cent FTSE overall with women on boards. How do we move chaired by women. Why is that, compared to the process for this forward if quotas aren’t the answer? corporate boards? Looking at the differences, most of these posts are publicly advertised. There’s a fairly strait-jacketed Robert Armour: We haven’t really talked about minorities, process to public sector appointments, set by Government disability or international experience. It’s much easier to bodies. Sometimes that is frustrating, but nevertheless it tackle gender as you can tell men and women apart; it’s has achieved a result which is overtly fair. In many ways the much harder to enforce a quota for international experience. corporate appointments tend to be less visible. Perhaps different approaches to different aspects of this problem would work best. Peter Waine: When we make public appointments we are asked to advertise as a parallel exercise. Not once have the Peter Swabey: The requirements of each board will differ, people from the advert got onto the shortlist. depending on the company. Caroline Evans: I think what you say is interesting: if you Lorraine Young: I’ve found that on some boards, where had a public sector appointment and were not allowed to I’ve done board evaluation, they seem to have a pretty contact anyone except via the advert, do you think you good handle on their strategy and the kind of skills and would have had the right people coming through? experience they need in a general sense. Although with one evaluation that I did, honestly I think that if there were 10 Peter Waine: The answer is, we wouldn’t. or 12 directors there were 10 or 12 suggestions as to what they needed to do about the next board appointment. If Caroline Evans: I think there is a middle ground in they’re only a small UK company operating in the UK, the recruitment between the hearts and minds and knowing international experience wouldn’t perhaps be relevant for the ‘right’ person and having mechanical systems in place them, unless they are wanting to expand. A lot of them are that encourage you to widen the net, so that you get a quite good at linking their requirements into their strategy. different perspective, but still maintain the quality. It’s in The gender issue is perhaps just slightly different. Maybe there somewhere, but I don’t know who takes the lead on that fits into what you were saying about disability and other that; all of us probably. areas. There are almost two kinds of diversity, aren’t there? Janet Cooper: This idea of making non-executive director Janet Cooper: Yes. Gender diversity is much easier to appointments more public was discussed at Cranfield’s monitor and measure, because it’s very obvious. Everything14 w w w . c h a r t e r e d s e c r e t a r y. n e t
  15. 15. In association with Flexibility Janet Cooper: So what are the steps we need to take? Kerry Porritt: We need to look at a lower level in the organisation. If women in their 40s and 50s are a bit backward at coming forward, then let’s look at women in their 20s and 30s. How do you push them, change their expectations, make them want to go forward; how do you build the networks? How do you make sure, as a corporate, that you’re talking to other corporates so that these women are gaining relevant experience so that when they get to their 40s and 50s they can make that move? Julie Bamford: I think we should recognise people that are in their 40s and 50s now. Organisations need to value people who don’t shout loudest about their achievements. If a department does well, a man in charge may say, ‘I did this’ whereas a woman is more likely to say, ‘We did this – as a department.’ Organisations need to shift their thinking, so that the people who are quietly doing very well get noticed as well as the ones shouting about their achievements. I don’t think women are saying they don’t want to be put forward. Talented women are there, they’re just trying to be recognised in different ways. Peter Waine: While talented women are definitely‘Reporting tends to change there and there are enough to make a huge difference to the diversity on boards, I think your comment is slightly too hopeful that your generation of women, if they’re behaviours.’ looked after and given more confidence and confidants and mentored, are going to be different from the Julie Bamford previous generation.else is harder to define, which makes it harder to measure. If Maggie Heasman: Often women still do have to look afterwe want a more diverse board, which is more representative the family, so they don’t have the time there to take onof customer base, gender is a factor. How do we move the these extra responsibilities.argument forward, to achieve better diversity? Peter Waine: It’s back to this very important pointRobert Armour: Most boards could measure diversity. of confidence.Our companies measure ethnic diversity in the workforceand could, if they wanted to, publish it. Public sector Kerry Porritt: It’s got to be about choice. A lot of theappointments always ask about sexual preference and ethnic most successful female business people in this countrybackground, so we could do it if we had a mind to. But are entrepreneurs who start businesses from home tomaybe that’s not necessarily the right approach. Maybe the accommodate childcare. I think it would be wrong toquestion should be more about the skills that the board say that every woman who decides to stay at home withneeds. The point of bringing different groups in is to avoid children should then be pushed back into work. However,groupthink, where everybody comes from the same angle I know that companies like Deloitte for example have verybecause they’ve come up through the same industry with good mentoring, where somebody has got a partner whothe same training. keeps them in touch with what’s going on and helps them through that transition back to work after children. TherePeter Waine: We’ve got to be careful about trying to fight are bigger firms with the scope to be more flexible in howon too many fronts simultaneously. We might find some they approach women and careers and childcare. But I thinkchairmen who are very willing but who feel that they’re that for smaller companies it’s quite a big ask.having all this thrown at them. Let’s pick one or two reallysignificant things and go for them, instead of this right Caroline Evans: I think there’s two things on that. I thinkacross the board approach; that’s not the way forward. one is that amongst SMEs and smaller businesses, the w w w . c h a r t e r e d s e c r e t a r y. n e t 15
  16. 16. Board composition success rate of women-run businesses is much higher. Caroline Evans: I agree entirely, but what about generation Now that suggests that women don’t need the status Y? Talking about diversity, is generation Y going to want and the structure and everything else to feel they’re being what we’re aiming to achieve, will that generation of successful. Perhaps a lot of the big corporate environments women actually want it? A female partner in a strategy make it harder to feel confident and successful, perhaps consultancy has recently commented to the effect that: I’m it’s more isolating. I think at every stage women or any glad I’ve done it my way, but I’ve got a daughter and I don’t minority needs a mentor as well. As agents we need to know if she’s going to want this. So are we trying to achieve support, mentor, sponsor and push forward people or something that, by the time we’ve achieved it, generation Y empower them by saying; you might think you’re here, is going to say, no thanks! but actually I can see comparable people and actually you are here, you’re better than you think you are. So there’s a lot that can be done. I think perhaps it’s a power Age struggle that maybe women just don’t want to waste their time on. Robert Armour: This makes me think of another diversity issue: age discrimination. We tend to put people over 50 Peter Waine: That’s a very good point, because I think on the board. You can get some very talented, able and women can’t see the point of company politics. They just energetic candidates in their late 30s, early 40s. It’s quite think that talent, per se, should get them there. And yet difficult to spot them and sometimes it seems a risk. But there are company politics. actually, you know, one of the things... the groupthink that we are trying to counter, often derives from the fact that Janet Cooper: I think part of the issue is that they don’t everybody’s in that 50 to 65 age bracket. know when to come forward. They don’t feel valued; they don’t feel their skills are actually worth anything. Peter Waine: I think that’s changing. We’re finding that, increasingly, people have had a lot of exposure by the age Caroline Evans: There is also perhaps a perception of of 45 and their companies are very willing to have one non- rigidity. They’ve perhaps gone down the entrepreneurial executive position of that age because they realise that no route because they can manage their life as they want to. business problem is unique. Why would you want to step back into a corporate, having liberated yourself from that kind of structured working Kerry Porritt: There was a very good book published environment? These people are crucially valuable in terms of about ten years ago now, called Funky Business, by Jonas their skill set. Ridderstråle. His argument comes back to your generation Y point, that there’s a lot going on in the world and people Peter Waine: They’re just as valuable as the Unilever person now have so much choice. His quote was: ‘Sameness sucks.’ who has been cocooned and has never been in the outside The thing that’s making people invest in companies, buy world in a way. Whereas this woman entrepreneur has had from companies, do business with companies is diversity. to try and work out where she is going to find, A, the time And actually, he could foresee in the future that it will come and, B, the money to pay the next stage, those Unilever down to having a connection with the people who were people have never had that experience. leading these organisations. I think that’s still really relevant today. I think you need to be looking on a much bigger Caroline Evans: That’s interesting. You’re saying that you scale than just gender diversity to say: ‘How are we going to couldn’t take someone from a big corporate out and put attract generation Y into our organisation? Do we do things them in an entrepreneurial environment, but potentially differently? Do we look at things differently to get them to what we’re saying is, you could take an entrepreneurial come in and buy into whatever the brand is? achiever out and put them in a big corporate. Caroline Evans: I think, yes, and I think the need to do Peter Waine: I think you can in certain cases and you could so is reflected in hard commercial terms, isn’t it? If board- do more if we’d all think it through a bit more carefully. But involved women are performing better then there’s an it’s not just a neat automatic process though. investment decision for everyone to make; whether to buy shares because there’s a woman/women on the board Robert Armour: I think Kerry’s bottom-up approach has because you think it is their presence that is making the got to be combined with the top network which says, company more successful. we’re actually going to do a message from the top that the culture, the tone of the organisation is going to encourage a better gender balance. We are going to create more role Time to step up models and more opportunities. That in turn probably goes to raising confidence and courage in saying, ‘right, I’ll put Janet Cooper: Is there a supply issue, that there aren’t myself forward because I can see a chance to succeed rather enough talented people from diverse backgrounds who than a chance to fail.’ are available to take on these board appointments? Do16 w w w . c h a r t e r e d s e c r e t a r y. n e t
  17. 17. In association withwe agree with that? Is there an issue? Or are there somereally talented women and people from diverse backgroundsout there who should be considered for non-executivedirector appointments?Caroline Evans: Emphatically, yes. I’m struck almost dailyby the calibre of women available. The company secretarialprofession is a profession that holds a lot of women. Perhapshistorically there are two reasons for this. One is becauseof the way the profession has been perceived. Secondly, Ithink it’s because it plays to a lot of the less tangible skillsthat are absolutely crucial to a successful business, such assuccessful communication through business that womenhave the capacity for. The women who are coming up theranks through the company secretarial field are supremelywell-qualified professionals in comparison with any otherdiscipline. In particular, having had boardroom exposure,albeit perhaps in a secondary capacity, but they have thatexperience of what goes on in the boardroom, perhapson a number of different boards but the years of exposurethat you get are hugely valuable, over and above any otherdiscipline potentially.Janet Cooper: Now do you feel, as company secretaries,that you have a reasonable financial background?Lorraine Young: I think you’ll find there are a varietyof company secretaries. There’ll be some that take tothat and some that have got different skills. I think ‘Any minority needs a mentor.’across the board you’ll probably find the same withother executives coming through the organisation. Somecompany secretaries are running a big department and Caroline Evanshave to manage the budget, so they’ll need at the veryleast the basics and there are accounting exams in theICSA qualification. But beyond that, I think some of that is Julie Bamford: That can also be a very good way ofpeople’s inclination, isn’t it? I can understand the numbers; questioning. If you’ve got something coming to the boardI don’t always find them very exciting. Having done loads for a decision, you’ll probably have someone from belowof minute taking you need to understand what the board level presenting it. It’s a good way of establishingnumbers are about and look at the reports so that you whether that person fully understands what they’recan do the minutes. So I think most of us can, but not proposing. Because if someone on the board can say, ‘Inecessarily all of us want to. don’t understand this,’ that person will need to explain it to them in another way and in terms they can understand.Peter Swabey: I think I’d agree with that. I think mostcompany secretaries are financially literate. I question Peter Swabey: Yes, and then you’ll rapidly identify whetherwhether it’s actually necessary for a non-executive director the person presenting fully understands the proposal.to be completely financially literate. If they’re going to beon the audit committee, yes that’s an issue. But then they’ve Caroline Evans: On the other hand, company secretariesgot to have reasonable financial experience anyway. Surely also have in-depth understanding because surely the act ofthere are going to be some places for non-executives who minuting in itself must require a deep understanding of theare not necessarily that financially literate. They’re bringing subjects under discussion? If the boot were on the otherother diverse skills to the board, which are not necessarily foot, could everybody else in the boardroom minute as wellfinancial skills. That’s going to mean that they feel able to as company secretaries?question, in much more detail, financial information that isjust presented to them. Susan Henderson: I think there’s a distinction between being a company secretary and then going onto the boardCaroline Evans: Sometimes you need that person in of that company. You’d avoid that at all costs, becausethe room, don’t you, who’s prepared to say, ‘I just didn’t you need to be a dispassionate observer. Translating theunderstand that.’ skills as a company secretary that you’ve developed at one w w w . c h a r t e r e d s e c r e t a r y. n e t 17
  18. 18. Board composition organisation into another organisation as a non-executive director would be preferable. I also think that being able to see what it’s really like to be a non-executive director in another organisation would help you back in the company secretarial job you’re doing, to understand how you can better support the non-executives on that board. You can then see things from both perspectives. Peter Swabey: I can think of maybe one or two company secretaries who I’ve known who have been non-executive directors of other companies and for me that’s a waste. I think many have the necessary skills. That goes back to the thing we were talking about earlier, how boards and chairmen identify what the required background qualities of the non-executive director are and how they communicate those to the people who are searching for candidates. It seems to me that the outlook now seems to be excessively blinkered. We talked earlier on about the perception that a non-executive director must have experience on a company board. That’s not always going to be necessary. It just needs maybe to be that little bit more inclusive, but I think it’s still struggling to do that. Susan Henderson: But it gets back to Kerry’s personality argument, that you perhaps don’t want to be asking for financial experience, board experience. You’re wanting to ask for, you know, openness of mind, independence of mind, ability to challenge and be inquisitive. Julie Bamford: And you do need that mix, don’t you? You ‘Diversity is wider than need somebody who is all over the detail and somebody else who is ‘big picture’ and thinks strategically. Everybody should be looking at it from a different point of view, so just gender.’ Peter Swabey you don’t miss anything. That’s the whole point of diversity and to avoid groupthink. If everybody’s thinking about it differently, all the issues should be covered. Caroline Evans: That’s where there’s a disconnect in my industry. I’m a contingency recruiter. I recruit up to the top of the line route. There should be a greater relationship Making the change between the sort of executive search firms that Peter runs and the contingency recruiters that are bringing people up Janet Cooper: So how do we make that change to be the ranks. I’d welcome that, because I think recruiters have more inclusive? means of identifying future potential. Caroline Evans: I think there has to be something done Susan Henderson: But perhaps company secretaries can on the mechanics of professional development within play a role, because typically they’d be company secretary corporate culture so that it’s more inclusively relevant or to the nominations committee and probably be involved in more inclusively accessible. But I also think that somebody non-executive directors searches, which are usually quite needs to pick up the baton, take the risk and run with it. confidential. You know if you have a sales manager or Maybe quotas, or the diminishing pool of non-executives, or an assistant company secretary that’s required, everybody the issues around how big your executive board needs to be knows that that job’s up. But a non-executive search is will drive that. probably carried on quite quietly for some time. So it’s kept very close to the chest, without HR being involved. Robert Armour: I think part of it has to come back to the The company secretary, however, probably is involved relationship between search firms and the chairmen. The and even though the chairman would be speaking to the discussion on how wide you’re going to go has to be at headhunters, usually on the day-to-day logistics of setting up the point of setting that job description. I think the search meetings, it’s the company secretary that can be involved. So firms have got to try and encourage the chairmen or the maybe we should be putting our oar in and asking: ‘Is this a nominations committee to take a slightly riskier approach. diverse shortlist?’18 w w w . c h a r t e r e d s e c r e t a r y. n e t
  19. 19. In association withKerry Porritt: I do think there is something around the to go and talk to somebody else who can. But if the boardprocedure for how you come up with what you’re looking headhunters and contingency recruiters build mutuallyfor. Because at the moment, all the Code is saying is, report supportive relationships or the boards themselves spread theon what the process is. It’s not saying best practice would net wider, that would be a positive step.be to go through these sorts of routes to get to whatyou are looking for. A change is needed to force chairs to Janet Cooper: When you’re reporting on the newrecognise that a chat with other board members about what governance requirement for greater diversity, will you besort of person is required is not enough. I’m by no means saying, we’re instructing head-hunters to help us fill theseadvocating a cottage industry in this approach, but maybe vacancies and we’ve requested they consider diversity?you need a mandate on the support they get in putting thatprocess together, having a look at what qualities they need Lorraine Young: I think it depends if it’s happeningas well as the skills and experience. everywhere. Eight years ago when the Higgs report came out it gave more focus to the nominations committee,Susan Henderson: Again that’s something that the which previously people may or may not have had, that wascompany secretary can help with probably better than an HR supposed to change it all. But it hasn’t actually, has it? Itperson who is familiar with executive appointments. doesn’t matter if it’s the chair speaking to the headhunter. Does it make it any better if there’s a nominations committee?Lorraine Young: It’s quite a tough call to challenge the It hasn’t changed anything and I’m not sure it’s working.chairman, isn’t it? But if you’re a good company secretary,you’ve already got that relationship of trust and so if you’re Robert Armour: The wording on a company’s approach ischallenging them you can do it in a way that’s acceptable, going to be fairly generic. Almost inevitably we’re going towhich is perhaps much harder for the search firms. It’s a write a paragraph in the report that refers back to the codesharder call for them because it could affect their business. and says we instructed recruiters having due regard to theThey’re not wanting to go along and upset the chairman, skills and requirements and balance of the board, includingwho they’ve maybe worked with for so many years, by diversity. That will be given far more emphasis if there’s asaying, actually you shouldn’t be doing this; you should be quota requirement as we go forward. But you’re not goinglooking at the other people. to learn a great deal from that wording.Susan Henderson: But if the company secretary drops it Janet Cooper: So we’re saying that this requirement that’sin on conversations with the headhunter it might give the gone into the UK Corporate Governance Code is actuallyheadhunter a little bit more confidence perhaps to add one not going to make that much difference.or two different choices to the shortlist. Peter Swabey: I think it depends on how it’s managed.Robert Armour: Does the appointment criteria tend to One of the issues that we mentioned earlier is aroundbe agreed between the chairman and the headhunter, or investors in the market looking for a ‘big hitter’ of someHR, the company secretary and the headhunters or by the sort being appointed as a non-executive and that beingnominations committee? Because in some ways, if you favoured over somebody who is less well-known but whocould get the nominations committee to sit down with the might well bring more diversity to the board. Maybe thereheadhunter and say, look, let’s have a discussion, you’re is some merit in the market allowing companies to takemuch more likely to get a diverse mix than if it’s simply an more risk in terms of who they appoint as non-executiveinstruction to the recruitment advisor of ‘we’ve thought directors, rather than going back to the traditional ‘safeabout it, here’s the brief, do as you’re told’. pair of hands’. Kerry commented earlier that when you’re looking for a non-executive, you’re typically looking forJulie Bamford: To have a proper conversation with the a three year appointment. Well now, under the Code it’swhole nominations committee, HR and the headhunter is annual elections for directors. There is a practical issuedefinitely the best approach. there, because I can see that for some companies it’s going to take directors more than a year to actually get their feetSusan Henderson: That’s what we’ve done. under the table and really understand the business. But equally if you normally know in the first three to six monthsJulie Bamford: And through the board evaluation process, whether somebody is going to be a useful director on thelooking at recruitment to see how it’s being done. That’s board or not, perhaps appointments should be for onealso a good way for the company secretary to talk to the year, after which the chairman and the board can take anominations committee or the chairman about it. view on whether so and so is actually adding value or not. If not, then they can be discreetly persuaded not to offerCaroline Evans: I think the board headhunters are really themselves for re-election at the annual general meeting.going to be protective of their territory. That’s the onlyissue there. They’re not going to want the nominations Kerry Porritt: Yes, companies are not static; they’recommittee saying, well if you can’t find them we’re going dynamic. They’re either growing, they’re acquiring, they’re w w w . c h a r t e r e d s e c r e t a r y. n e t 19

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