10 Years On : The Evolving Role Of The Chair In UK Boardrooms
Corporate governance is cited as "a domain where tradition plays an important role and change is not always welcome" by INSEAD, the business school, in research on the practices of board chairs across the world. Looking at the UK findings, it is clear that it is a role that will become more vital both for its 'indirect' leadership, and for its ability to deal with change.
Technology skills will be a requisite for all board chairs in ten years, and more will come from technology, consulting or academia, rather than the traditional executive background, says an INSEAD report. They will be younger, and we will see more of them in their 40's. In the UK, Italy, and Denmark, there will be a rise in foreign chairmen. As for women - they will still be in a minority, but the report predicts a "marked improvement" by 2027.
It predicts that the career of the chair will change, and as the work intensifies, tenure will shorten and fewer will chair more than one corporate board. Professional chairs, ie people who do it for living, will increase in number and will work more with stakeholders. Succession planning and development, it suggests, will become an integral part of the chair's job, and technology will be one of his or her main tools.
In the UK context, fewer multiple chair positions of plc boards would make quite a difference. INSEAD's 2015 Chair Global Survey suggested the UK average was to chair two boards, and sit on another two or three as an independent director. Each chair position yielded an average £70,000 a year.
Interestingly, that survey found that "managing difficult board members" was the number one challenge for chairs in the UK. Generally, "challenging directors" fell into two categories it said - those who do not listen and speak a lot, and those who say little or do not speak at all. This rings a distant bell - I remember writing a piece for the FT in 2012 that came straight from the mouths of chairmen and saying "the problem of the silent non-executive is all too real in UK boardrooms."
Clearly some things don't change.
But, as my FT piece also suggested, directors should never be afraid of asking "dumb" questions. It quoted the then company secretary of a FTSE100 company as saying: "If the directors of some of the now failed financial institutions had asked dumb questions about some of the mergers and acquisition proposals or other opportunities put forward by the management team, the disaster that befell them – and their shareholders as a result – might not have happened."
INSEAD's report goes into the various approaches used by UK chairs on dealing with this management of "difficult" board directors. But it does not mention those occasions that also occur - when non-executive directors spend entire board meetings checking their Blackberries and remaining silent. As it points out, UK boards are not small, with 12.4 members on average. So one distracted director is possibly easy to ignore. But that same director may well sit on multiple boards.
In fact, the average tenure of UK non-executive directors has gone up to 4.9 years and at 59.6 years they are older than their 2006 counterparts, as Spencer Stuart's 2016 Board Index revealed. It found the proportion of NEDs serving as active executives in other companies versus portfolio directors to be at 33/67 that year. It also found that 27% of newly appointed non-executive directors were serving on a quoted board as a NED for the first time, and 39.6% of those first time appointments were female.
Which only goes to show that if you want any kind of diversity, and new faces at the boardroom table, you need to shift a few people out. You also need to look more broadly and with new tools in a digital world replacing the often entrenched relationships between chairmen and headhunters which remain in place even when that chair moves to another role.
For more thoughts in that direction, see my blog for the Financial Reporting Council, the latest one on the FRC website reflecting stakeholder views on corporate governance to mark the 25th anniversary of the UK Corporate Governance Code.
The "unexpected findings of this research was that one of the most popular ways in which UK chairs accomplish their business is to share a good meal" says INSEAD. It goes on : "They eat out with other board members, executives, shareholders and other stakeholders, at business breakfasts, tete-a-tete lunches, afternoon drinks or group dinners."
The report puts this down to possibly having something to do with "London's recently acquired reputation as the culinary capital of the world." Hmm. While it is certainly a reflection of the importance of personal relationships for the role of chair, it is also potentially damning of boardroom culture that cannot see working with someone unless you can also see having a drink with them in your favourite haunt on a regular basis.
Looking 10 years into the future, INSEAD does tactfully see UK board leaders becoming "somewhat younger" - and also taking chair succession "more seriously." The UK code, it suggests, "will formulate comprehensive guidelines, and incumbents will have more ownership of the process."
With technology "slowly but steadily" conquering the boardroom, it states " "by 2026, technology will become what sharing a good meal is today - a stable platform for leadership."
It's just one throwaway bulleted point in a report well reading for its findings and its nuance. And indeed, when technology marches in, so will the women and the younger, unexpected talent.
The UK government has a Digital Strategy 2017 and you only have to look at some of the younger faces advising Number 10 on that front to picture true diversity. If "tradition" is blinkering the boardrooms of listed businesses when it comes to the corporate governance domain, it is doing so at their peril.
Those 'societal norms and values' in the INSEAD graphic above matter - and if business is to play its valuable role in society, it cannot be disconnected from it in its leadership.