BOARDROOM CONVERSATIONS: CONVERSE WTH AN ACKNOWLEDGED “A BOARDROOM EXPERT AND TAKE THE BENEFIT OF CONVERSATION WITH RACHEL THEIR EXPERIENCE BACK TO YOUR LOMAX” BOARD FACILITATED BY JAMES BAGGE 26 JUNE 2012 DIRECTOR OF BVALCO LTD Bvalco hosted the conversation with Rachel Lomax as part of the ‘Boardroom Conversations’ series of targeted discussions with experienced Chairmen enabling them to share their insights and learning experiences of boards and corporate governance. The following paper is a summary of the conversation including questions from the floor. organisation has to be done as a team, 1. RACHEL, YOU HAVE AN IMMENSE where there is a shared sense of process BREADTH OF EXPERIENCE SERVING ON BOARDS BOTH IN THE PUBLIC AND and mutual respect; effective leadership is PRIVATE SECTOR AND OF LISTED therefore essential. However the external COMPANIES AND PRIVATE COMPANIES. pressures can be very different. Being on WHAT IN YOUR VIEW ARE THE the board of HSBC where there are no ESSENTIAL INGREDIENTS OF A COHESIVE AND EFFECTIVE BOARD? shareholder representatives on the board has a totally different set of pressures to I spent all my executive career in the being on the board of BAA, where there public sector. At that time I could only are shareholder representatives on the take appointments on the boards of not- board. Although on paper the for-profit organisations and I did this to responsibilities are the same, the make me be a better executive, to see experience is totally different. Similarly things from the other side of the table. the size of a board can affect the experience. Being on big and small boards I have since spent four years on boards of is totally different. commercial organisations both listed and privately owned and I do question 2. HOW THEN DO THESE DIFFERENCES whether the essential ingredients of IMPACT ON HOW YOU APPROACH THE TASK OF BEING A NON-EXECUTIVE? success are actually different. In both cases any positive effect you bring to an Page 1 Think, share, challenge, explore and learn It is critical to understand why you have which is often billed as the most crucial been appointed to that board and what thing to consider about being on a board. therefore are others’ expectations of what You want to keep well-connected, learn you can deliver. I’m on the HSBC board things you don’t know. because of my experience of the bigger 4. HOW DO YOU STRIKE THE RIGHT picture, at the Treasury and then at Bank BALANCE BETWEEN PLACING RELIANCE of England and so on. ON SOMEONE ELSE’S EXPERIENCE AND EXPERTISE AND FULFILLING YOUR OWN I draw on other experiences as a member INDIVIDUAL RESPONSIBILITIES TO HAVE of the BAA board such as my time at the YOUR OWN VIEW? Department of Transport. The shareholder I spent 25 years in the Treasury. An representatives on that board have a very institution often accused of arrogance. It tight grip on the finances. My role is to certainly teaches you to ask questions and bring much more of a strategic, advisory evaluate what other people say. As a non- perspective; and crucially, an executive you should not just take what understanding of the British political other board members say blindly on trust scene. any more than you would do for the executives. When vetting people to be on the Court of the Bank I tried to develop a clear idea of 5. YOU SPOKE EARLIER ABOUT THE NEED FOR EFFECTIVE LEADERSHIP ON A what a well-balanced board would look BOARD. TELL US A BIT ABOUT WHAT like. People ought to think about the YOU HAVE OBSERVED INCLUDING BOTH different sorts of experience and skills POSITIVE AND NEGATIVE LEADERSHIP SKILLS. around the table. There are many different ways of chairing When joining a board, if I had to think a board. Here are some examples of about what gap I filled I wouldn’t want to situations where the chair has managed a be on the board. Unless I’m convinced of situation well: this, then it is a waste of my time and the board’s. When he was Chair of the Court of the 3. WHAT ABOUT WHAT THE OTHER Bank of England, transitioning from a DIRECTORS BRING TO THE PARTY? body run by the Governor to non- executive, John Parker developed a The flip side of understanding why you are collegiate sense among the non invited to be a member of a board is to executives, by building relationships with appreciate who else is on there. There them outside the board room and by needs to be an interesting group of people regulating the formal discussions to to get to know – it’s part of the fun. As to prevent a few directors from dominating who else is on the board, having a shared the debate. understanding, an ability to have good discussion and being able to trust each The second example is Chris Hogg at the others’ judgement underlies the raison National Theatre board. That was an d’etre of the board. The other people are amazing board – very diverse, with a rich more important than a perfect chairman, mix of directors from creative and Page 2 Think, share, challenge, explore and learn business backgrounds. There was always a 7. DOES HAVING A FORMER EXECUTIVE free-flowing conversation to which CHAIRING THE BOARD IMPACT ON THE DYNAMICS AROUND THE TABLE? everybody contributed. Chris was excellent at directing the meetings but not If we hadn’t been convinced he had the dominating, like an artistic director capacity to reposition himself as no longer himself. part of the executive the board would not have appointed him. He has had to form Both these Chairs demonstrated a kind of new relationships with the board. ‘look no hands’ way of running a board well, but their approaches were very 8. WHAT ABOUT THE BEHAVIOURS OF different. INDIVIDUAL MEMBERS OF THE BOARD? WHAT’S GOOD AND WHAT’S NOT SO John Parker achieved a lot of change by GOOD? developing bilateral relationships with I have a particular aversion to board board members outside the boardroom. members who are longwinded and As far as I could tell, Chris Hogg was the domineering –or just take up too much air opposite, and achieved results through time - or worst of all, try and usurp the unobtrusive but highly effective formal chair’s function and take control of the chairing skill and natural authority. agenda whenever the chair pauses for People need to use their personalities breath. This is one of the disadvantages effectively, and these two chairs did that. of having “big beasts” around the table – people who might chair other boards. 6. AT HSBC THE FORMER FINANCE DIRECTOR HAS NOW BECOME CHAIR. At the other extreme not contributing, WHAT DO YOU SEE AS THE ADVANTAGES AND DISADVANTAGES OF THIS? “sitting and sulking” is nearly as bad though it is a fault that all male boards What any board looks for in a chair are somewhat less prone to. reflects its particular circumstances. The arrangements at HSBC have changed over Boards become ineffective when the the past few years. Stephen Green was relationship with the executive goes initially an executive chair but he became wrong – either because some directors get a full time non-executive chair in his last too close to the executive and lose couple of years. His successor, Douglas independent perspective, or because the Flint, is a full time non-executive chair too. executive ignores or tries to run rings Following the financial crisis, dealing with around the board. It’s all about mutual governments and regulators has become respect, and where that’s missing, things hugely important, for HSBC as for other go wrong. global banks, and it is a major focus for The evolution of subgroups within the Douglas, who has established strengths in board can be disruptive particularly this area. In other words, he is the right where, as a result, information or opinions person for the job, at this juncture. are shared on a selective basis among the members of a board. There is a difficult balance to strike here. Page 3 Think, share, challenge, explore and learn Of course boards, particularly large 11. FINALLY WE HAVE SEEN RECENT boards, have to have committees. But the EXAMPLES, PARTICULARLY CONCERNING REMUNERATION, OF GREATER committee structure can itself be SHAREHOLDER INVOLVEMENT AND unhelpful. They may not meet very ACTIVISM. IS THIS SOMETHING YOU frequently and you can’t really get to WOULD ENCOURAGE AND HOW DOES A know the rest of the board this way. BOARD BEST HARNESS THIS ENERGY AND ENGAGEMENT? Active steps need to be taken to see this happens whether by dinners for non- My experience of private companies executives before a board meeting, or suggests that private shareholders focus away days, and encouraging email intently on remuneration, as a key lever exchanges. for motivating managers. Clearly, Remuneration is a major issue for I recognise that there are always going to shareholders. But in a public company be groups within a board who know each with a widely dispersed shareholding I other better. The executives know each would question whether the dream of a other much better than non-executives. dialogue with shareholders is realistic. But too much clubbiness, whether There may be thousands of shareholders, between exeuctives or with and between none of whom own more than a tiny non executives, can undermine a board’s proportion of the company, any of whom effectiveness. can sell their shares at any moment. 9. HAVE BOARD EVALUATIONS BEEN Investor relations is a branch of public or HELPFUL IN YOUR EXPERIENCE? even press relations.
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