Conference hears call to widen the gene pool when directors are appointed

Article Type: Notes and news From: Industrial and Commercial Training, Volume 42, Issue 2

Delegates at the 10th International Corporate Governance Conference were asked to widen their search for potential directors to areas such as the public sector, where directorial knowledge and skills are kept up to date.

Colin Coulson-Thomas, author of Developing Directors, said: “Recent events have called into question the value added by many boards, particularly those of financial institutions that have been bailed out or whose assets have been written down. The banks rescued by governments are not obscure companies run by inexperienced directors; they include household names, whose board members have included the ‘great and the good’ of the City establishment.

“Despite their directorial pedigrees, clear duties and responsibilities and regular attendances at meetings, many directors seem to have neither noticed nor questioned dangerous practices. Executive directors have not been held to account. Boards have presided over bank cultures and practices that suggest a short-term focus, self-interest and greed among those for whom they have been responsible”.

He suggested an alternative to “safe directors” who “look the part” with their “smart suits and track records of service on company boards”, who could be relied upon not to question, challenge or probe. “We need to look beyond the ‘normal suspects’ for people of integrity who would be willing to ask difficult questions and who would welcome an opportunity to make a contribution”, he said.

“Given the evident deficiencies of the current narrow gene pool from which directors are selected and the lack of value some of them appear to add,it ought to be possible to do better. A new generation of directors is required,selected from people of integrity who have their feet on the ground, are alert to risks and the reality of what is happening around them, and who think for themselves”.

He pointed out that charities had a big impact on the lives of many people,yet those who served as charity trustees were often unpaid. “They have significant legal duties. They attend and contribute to board meetings, and discharge their responsibilities without any hope of personal financial gain. Their motivation derives from the vision, purpose and work of the organization and their reward comes from the satisfaction of contributing to its success”,he said.

The major professions, many of which were self-regulating, could also have a significant impact on the lives of citizens. “Despite their responsibilities and what is at stake, committee and council members generally give their time for free. Like charity trustees, all they normally draw is out-of-pocket expenses. Again, they want to make a difference”.

He said that his experience of local, regional and national public-sector boards was that “many members devote much time to preparing for meetings and often engage in rigorous questioning that would be unusual in some private-company boardrooms”.

He continued: “Directors do not need to be mercenaries whose first thought may be to arrange alibis and disclaimers and maximize their remuneration. It is possible to find people of integrity with directorial qualities and experience outside the relatively narrow ranks of the City establishment and those who already have plc director experience”.

Outside the rarefied atmosphere of plc boardrooms, motivated citizens were giving considerable time, much of it unremunerated, to service upon boards that had a significant impact upon their fellow citizens.

“Many of them are displaying directorial qualities that would put some high-profile directors of large corporations to shame”, said Colin Coulson-Thomas. “Few of them fit the caricature of the ‘nodding donkey’ or the ‘cardboard cut-out’. Most are committed and highly motivated to provide effective governance, and within the parallel dimensions in which they operate – whether charities or the public sector– significant effort may be devoted to ensuring their directorial knowledge and skills are kept up to date”.

He did not, however, expect sudden or large-scale change. “Directors have onerous duties and responsibilities and, because of what is at stake,selectors need to exercise a degree of caution”, he commented. “A core boardroom team of competent and experienced directors with more conventional backgrounds may first need to be put in place before existing directors feel confident enough to consider additional appointments from beyond the ‘normal suspects’ that might bring greater diversity and fresh thinking into the boardroom”.

The conference was organized by the World Council for Corporate Governance and held at the Royal Overseas League, London. The theme was “Re-energizing Corporate Governance by Realigning the Moral Compass of the Boardroom”.

Directors of more than 4,000 organizations, from smaller firms to major corporations and public bodies, have taken part in Professor Coulson-Thomas’s research programme, which identifies what the most effective directors and boards do differently. His books, Developing Directors and Winning Companies; Winning People, set out the differing approaches of those who are most and least successful.