12 May

A seat on the board

first_imgRelated posts:No related photos. Beingappoin`ted a non-executive director to the right company can be a shrewd careerdevelopment move but as Rob McLuhan discovers HR professionals, who often lackactual board experience, may need to work harder than most to be askedAnon-executive directorship used to be thought of as a perk for retiring Citychairmen or a bolthole for sacked Tory cabinet ministers. These days it isregarded as a serious job, and one that any senior professional can aspire toas a means to broaden his or her horizons.Lookaround at the shambles that some companies seem to create and it is quicklyapparent that non-executive directors have an important monitoring role toplay. Their impartial advice can help avoid causing public outrage withill-advised bonuses to directors (Marks & Spencer), actions that threatenthe environment (Shell with Brent Spar), or disastrous negligence (BaringsBank).Itis to help steer clear of these pitfalls that Stock Exchange regulations insistupon an objective presence on the board for publicly quoted companies. This isalso recommended by the Combined Code of corporate governance commissionscarried out during the last decade, which urges that no less than a third ofthe board should consist of non-executives.TheInstitute of Directors says companies – both listed and unlisted – arevoluntarily exceeding this level to around 40 per cent, while the number ofcompanies with non-executive directors has increased to 60 per cent.Asurvey by the Reward Group shows average earnings by a non-executive directorrunning at around £160 a day, and specialist recruiters say the job can bringin £15-25,000 a year – more in large organisations. In the US there is a trendto pay with share options rather than a flat fee, although that practice hasattracted controversy in the UK as likely to put objectivity at risk.Atfirst sight this looks like money for jam. A non-executive director is expectedmainly to show up for board meetings, which are typically held once a month –fewer in some companies. But a closer look shows the position can actually bequite onerous.”It’sa difficult role to perform,” says Daniel Summerfield, corporategovernance executive at the Institute of Directors. “Non-executivedirectors have to maintain distance from the organisation because they arebringing a wider perspective, but they have also to keep their finger on thepulse.”Thatmeans getting to know the issues, keeping up with the minutes of boardmeetings, chairing committees, and perhaps hobnobbing with important clients.All these activities can seriously cut into regular job hours, which is whymost working professionals would not normally hold more than one such positionat a time. Another potential drawback is the responsibility: under law the non-executiveteam is held equally liable for any criminal or negligent activity.Thornyissues that could engage a non-executive director might be how to handle a bidfor the company that goes against the personal interests of the directors, or aboard appointment that is not working out, as well as disagreements to do withboard succession and remuneration.Butnon-executive directors can also help set strategy, particularly if they haverelevant experience. They may be valued for their City, institutional or evengovernment contacts. And they may have an understanding of issues that relateto changes that a company is going through, for instance globalisation or theimplementation of major new IT systems.”Wesay to clients that we will try to find someone who has experienced what theyare going through,” says Patrick Dunne, director of venture capitalcompany 3i. “That particularly applies to start-up companies, when thereal world intervenes and they have to adapt.”Experienceof HR can be useful to a company that is involved in recruitment issues such asInternet jobsite StepStone (see box). However, this is relatively unusual.Hanson Green, which specialises in the hiring of non-executive directors, saysthere is not much demand from large listed organisations for HR professionals,although it does make placements in smaller companies.”Thedifficulty is that clients want someone with an operational background,”says Hanson Green director David Treadwell. “I personally believe HRpeople are equally well qualified as managing, marketing or finance directors,but many companies perceive that this is not the case.”Boardmembership is usually a prerequisite for large listed organisations, and hereagain HR professionals are likely to be at a disadvantage since so few haveattained this. However,those who have general managerial experience outside the function could beattractive to smaller companies.Akey job for non-executive directors is to chair the remuneration, nominationand audit committees, and the first two at least have a special relevance toHR. Remuneration can be particularly sensitive, given the public scorn acompany can attract if its payment of directors is seen to be excessive.Thejob also requires a particular set of personal qualities. Treadwell says,”The people we approach are senior, established in their roles, and havethe technical skills. They understand how boards work, and are financiallyliterate.””Butthey also have to have skills you can’t teach – tact, a sense of humour, andthe ability to influence without commanding, and if these are absent they areunlikely to succeed in the role.” Some managing directors make poornon-executive directors because they can’t stop taking control, he adds.Andthey should be ruthless where the occasion demands. When the chairman and chiefexecutive of Cable & Wireless were at loggerheads a few years ago, thenon-executive team stepped in and removed them both. Assumingit is possible to acquire a non-executive directorship, the benefits in terms ofpersonal development are generally acknowledged.”Itcould have important advantages for a person’s career, improving theircredibility and raising their profile,” says John Stork, managing partnerof Stork & May, career strategy consultants for senior executives.”Also, it widens their contacts and gives them more options were they toleave that job.”Themoney is not good enough to be a motivation, says 3i’s Dunne, except for thosewho get involved in an entrepreneurial venture with potentially lucrative shareoptions. However, personal development would be a good reason for taking it on,he agrees.”Alternatively,you might want to do it just for the fun of it, as an interesting andchallenging to do,” he suggests.Butgiven the difficulties HR professionals have getting onto the board of theirown companies, should one even consider trying for a non-executive positionsomewhere else? Absolutely,says Dunne. “If you are with a well recognised high-performing company,it’s not unrealistic, as long as you are absolutely clear why you want to do itand what you can contribute.”Asto acquiring a position, some people may be approached by headhunters whileothers will themselves initiate the process by sending their CV to a specialistrecruitment agency. But at this level it is word-of-mouth that often bringsresults. “Mostpeople get appointed through their networks they have or build,” saysDunne. “If you really want to do this and start talking to people, youwill probably get there. Then once you have experience, other opportunitieswill quickly arise.”Rolecan offer great career development opportunitiesLesleyJames former HR director, Tesco. Non-executive directorships: Selfridges, Care UK, West Bromwich Building Society,DTI Insolvency Service Steering Board.”IfI had not been on the board of Tesco I don’t believe I would have been soughtout to join Selfridges as a non-executive. Having got that appointment I wasapproached by Care UK, which provides residential homes for the elderly, andWest Bromwich Building Society.”Thecontribution I make comes less from my understanding of HR than from my generalbusiness experience. In Tesco the job was about changing culture, expansion,and mergers and acquisitions, and Selfridges was going through a demerger whenI joined.”Carewas interested in my background in a leading service company. The same is trueof West Bromwich, it is keen to provide fantastic customer service, and wherebetter to go for insights than someone from Tesco? With the DTI the need wasfor an understanding of how the private sector operates.”Ialso chair the staff policy committee of the Open University, am a trustee of achildren’s charity, and sit on a DTI advisory panel on partnership funding. Theseare unpaid non-executive roles and are as good a development opportunity for HRprofessionals to consider as anything.”MichaelMaher, former group HR director of food company Dalgety, now chairman of printand packaging specialist Jarvis Porter. Until recently he held non-executive directorships with StepStone.com,Motivano.com, and Jarvis Porter.”Mostcompanies will look for other skills besides HR in their non-executivedirectors. I have spent eight of the last 20 years in general management. StepStonesaw itself as unique in having an HR professional on its board. However, I wasnot there to give internal HR advice, but for my understanding of therecruitment and corporate market.”HRprofessionals on executive committees tend to think of themselves as beingthere to do an HR job. I believe that’s the complete opposite of what’s needed,and is why they don’t get on the board of public companies that frequently.It’s not about being an excellent HR technician, but being a good generalmanager, and applying intellect across a wide area of responsibility.”Mymain responsibility in both StepStone and Jarvis Porter was as chairman of theremuneration committee. I was eventually appointed executive chairman of JarvisPorter, which meant giving up my non-executive roles. As chairman I haveappointed two non-executives into Jarvis Porter in the last 12 months. I havelooked for people with complementary skills, recruiting one with an excellentsales and marketing background and another with experience of mergers andacquisitions.” Comments are closed. A seat on the boardOn 12 Jun 2001 in Personnel Today Previous Article Next Articlelast_img
Read More