2004 - Boardroom diversity
One of the aims of the Higgs
review of corporate governance, most of which
has now been included in the UK Stock Exchange's
combined code of best practice, was to broaden
the pool of potential non-executive directors
capable of serving on the boards of public companies.
A proposal by the review that
London Business School should compile a list of
potential candidates was quietly dropped. The
result, I suspect, is that companies will not
be rushing to recruit from outside the narrow
confines of business. If anything, the demands
of corporate governance may be restricting rather
than promoting professional diversity.
Before these demands began to
redefine the role of the board, non-executive
directors were often recruited for their connections.
Now more companies appear to be expecting previous
experience in a senior executive or non-executive
role. Peter Waine, director of Hanson Green, the
specialist recruiter of non-executive directors,
says that people outside business "simply
don't come into the equation".
In the past 10-15 years, carrying
out hundreds of searches for non-executive directors,
he says he has been involved in no more than a
handful of appointments involving people without
business backgrounds. "Our clients cannot
relate to a career that's non-business. They don't
need to and they don't want to," he says.
This invites the question: would
professors such as the late Sir Roland Smith,
the man who as chairman of House of Fraser once
told Tiny Rowland to "get your tanks off
my lawn", or Sir Fred Halliday, chairman
of Northumbrian Water, be recruited to a top board
Smith belonged to a generation
of tough, combative chairmen in an era when contested
takeovers were far more prevalent than friendly
mergers. But it was also a time characterised
by the kind of malpractice that led to successive
reports steadily transforming the focus of the
non-executive director from that of business supporter
to business guardian.
Sir Derek Higgs believes that
one of the most important qualities of the new
generation of independent directors should be
an ability and willingness to ask difficult questions.
He has also been a strong supporter of able outsiders.
So why couldn't media inquisitors such as the
BBC's Jeremy Paxman or John Humphrys prove to
be models for the role?
"They would be seen as too
cerebral and not good team players because they
are too questioning," says Amin Rajan, chief
executive of the centre of Research in Employment
and Technology in Europe. "The reality is
that when people are considered for a board appointment
the key question is not about experience but about
the comfort factor. Do the chairman and the other
board members feel comfortable about you?"
So how can those without private
sector boardroom-level experience get to be a
non-executive director? The answer would appear
to be: "With difficulty". For now, at
least, the boardrooms of large public companies
are going to remain the favourite hunting grounds
of search firms.
Most headhunters seem content
to catch the familiar fish rather than trawl among
the professions. A few barristers get noticed
but rarely is the net extended to academia, the
law, or professionals from medicine, sport, the
arts or the media.
In fact there are few signs that
anything other than demands in some companies
for more diverse employment policies is going
to change things. The best bet for serious prospective
candidates may be to take some tuition in corporate
The London-based Independent
Direction Directors Advisory Service (IDDAS) runs
one-to-one tuition for prospective non-executives.
Jonathan Cohen, one of the partners, says he would
fit prospective candidates into three categories:
"At one end there are those who want a couple
of posts to fill their time between rounds of
golf and at the other are those who have kept
up their skills and their contacts at the top
of the tree.
"The first category should
stick to their golf and the third may not need
any advice. But there is a large middle group
of people - who have had senior roles - who would
wish to embark, or who have already embarked,
on a pluralist career. These are the people we
think we can help most."
"But if you are going to
go on a board there will be no use sitting on
a remuneration committee if you don't know how
an LTIP (long-term incentive plan) or a share
option works. In future non-executive directors
will need to demonstrate some evidence of continuous
Sara Murray, 35, is one executive
who has used IDDAS to refresh her boardroom skills.
Having founded and sold three companies, she wants
to expand her board work. At present she is a
non-executive director of Schering Health Care,
the pharmaceuticals company.
"I'm not scared to say what
I think," she says. "I'm a problem solver,
reasonably bright, I know about the market and
I'm well connected. I have a lot of energy and
need somewhere to channel it."
Even so, she has encountered
some prejudice, particularly among boards that
she characterises as "stale, pale and male".
She says: "I have seen three or four people
who have commented on my age. Some will not look
at you at all because they have a minimum age
barrier of 45."
Her existing appointment, however,
proves that some companies are now willing to
look at younger people with entrepreneurial backgrounds.
But this is still business dealing with business.
There remains a kind of invisible barrier that
prevents companies exploring other occupational
streams. The argument we hear most - that people
outside business simply cannot be expected to
understand the workings of business - seems spurious
in the extreme.
There is a stronger argument
for non-executive directors to work their way
up through the system, starting, perhaps, with
a strategic health authority or leading charity
board, before moving to a small or medium-sized
company. Elizabeth Filkin, the former parliamentary
commissioner forstandards, now a non-executive
director of Jarvis, the engineering company, and
of Stanelco, the radio frequency applications
company, believes that public sector boards are
good places to start for those wanting to go further.
Companies, she says, should recognise
that large charities and public sector bodies
have similar demands to those of business. "A
university or a big charity is a business. They
have a clear purpose, they run within financial
constraints and they must operate within the law,"
How many times must this message
be repeated if companies are to shake off their
traditional conservatism and broaden their outlook?
Sooner or later we may see a new kind of animal:
the professional non-executive, devoted to no
But must this new professional
be bred from a single business clone? Board diversity
should mean something more than a token woman.
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