Getting the Right People Around the Table

By Cleo Thompson (London), founder of The Gender Blog

Last year, The Glass Hammer covered IDDAS’s report on the female perspective on board effectiveness, in which the London based provider of board level coaching and leadership development services interviewed some of the most senior women in British business (female board members of FTSE 350 companies) and took their views from the top.

This year, in the wake of the 2009 Walker report which examines UK corporate governance and makes suggestions as to how to improve board effectiveness, the IDDAS team have gone to the top of the tree and interviewed 21 FTSE 350 and large companies chairmen, asking them about the skills required of a chairman, their relationship with the CEO and the key issues that need to be addressed in running a board.

The survey – “Board Dynamics: The Chairman’s Perspective” – was launched in London last week and investigates key corporate governance issues, including diversity, succession planning and board assessment.

New Code for Governance

The research behind the report is rooted in the behavioural aspects of the new corporate governance code suggested by Sir David Walker, which includes the following key recommendations:

• Selection and diversity: aimed at encouraging boards to be well-balanced and to avoid “group think,” there are now new principles on the composition and selection of the board. These include the need to appoint directors on merit, against objective criteria and with due regard for the benefits of diversity – including gender diversity.
• Challenge and debate: aimed at promoting proper boardroom debate, there are now new principles around the chairman’s leadership and the responsibilities of non-executive directors to provide constructive challenge.
• Board development: this section of the code suggests that the chair holds regular development reviews with directors – and, for FTSE 350 companies, these should be externally facilitated at least every three years.
• Annual elections: as a way of increasing accountability to shareholders, all directors of FTSE 350 companies should be re-elected annually.

Own goal?

Appropriately enough in this summer of the 2010 soccer World Cup, , the interviewees were able to make a footballing analogy around the topic of diversity, with one participant commenting that:

“[Diversity] is extremely important, because what you want around the boardroom table is differing perspectives; if, for instance, you have 12 goalkeepers, then you won’t let in many goals, but you won’t score any!”

The IDDAS report found universal agreement that having an assortment of skills, experience and perspectives is vital for good performance. Suggesting that some of the lessons around the dangers of “group think” have been noted, the interviewees agreed that “diversity of opinion is critical” and that “what you actually want on a board is a variety of people who have a variety of views…”

However, despite their enthusiasm for diversity, several of the chairmen warned of translating this into a traditional diversity agenda for PC reasons. They spoke of avoiding “formulaic representation,” using “dangerous quotas” and, above all, steering clear of tokenism.

The Customer is King – or Queen

Many of the participants were very clear on the tie between the makeup of a board and an organisation’s customer base, with some noting in particular that:

“On the male/female gender mix, it’s fairly clear that, if you have a customer-focused organisation, you need to represent that customer base …”

and –

“For a food company, it would be extraordinary to have a board which was all men. It would be bizarre, as we need to understand tastes, fashions, social trends. We must reflect our consumers.”

One particularly robust commentator even went so far as to say that:

“If a board does not have a woman, it should seek one.”

It will be interesting to note in the coming years the extent to which Walker’s recommendations have a visible and positive impact on the number of senior women participating at board level in either full or non-executive roles.