“Governance – recruiting the best Non-Executive Directors”

London Excellence Leadership Forum – 6th March, 2014

Summary by Jon Webb

I had the privilege of Chairing the Leadership Forum organised by London Excellence at Gensler, the international architects, design, planning and consulting firm in London. The three panellists were –

Liz McSheehy (LM) – CEO, School Governors One Stop Shop

Jayne Nickalls, Non-Executive Director, Jadu and the Financial Services Compensation Scheme

Sir Eric Peacock (EP) – Chairman, West London Business

The audience of about 30 people was a mix of CEOs, Directors, Managers and School Governors, from public, private, multi-national and SME organisations. The event was presented in the style of Question Time.

This was another very topical subject and we heard insights from different sectors of business and schools about Non-Executive Directors and School Governance.

The introduction to the Forum read as follows –

The Institute of Directors defines the non-executive director’s role as providing a creative contribution to the board by providing objective criticism.

The 1992 Cadbury Report initiated a debate about the main functions and responsibilities of non-executive directors. Today, it is widely accepted that non-executive directors have an important contribution to make to the proper running of companies and, therefore, more widely to the economy at large. As the Cadbury Report said, they “should bring an independent judgement to bear on issues of strategy, performance and resources including key appointments and standards of conduct.”

There is no legal distinction between executive and non-executive directors. As a consequence, in the UK unitary board structure, non-executive directors have the same legal duties, responsibilities and potential liabilities as their executive counterparts.

Non-executive directors therefore have a key place on the board of organisations from all sectors – with growing prominence in sectors such as education. Given that the role is often unpaid, how can organisations attract, recruit, develop and retain the best non-executive directors to add most value to the business?

Rose Viggiani, Chief Executive, London Excellence

The summary below does not fully represent the depth of discussion and contribution made during the event, but outlines some the main points discussed.

Key messages that came out from the session that I would like to share are itemised below.

  1. Responses to the question about ‘advice you would give to people recruiting

Non-Executive Directors’ included –

  • be clear about the role you want filling and what you want from it;
  • start the recruitment process early and use your networks to help find the appropriate candidate;
  • focus on the skills required;
  • look for someone who is passionate about the business;
  • trust your instinct/gut;
  • look for someone who will add value;
  • have a ‘maverick’ on the Non-Executive Board to test the boundaries; be dynamic.

If you are considering being a Non-Executive Director observe how the Chairman and Chief Executive/Managing Director work together. This will give you an insight into the culture of the business.

  1. In response to the question about Non-Execs arriving unannounced at Executive meetings, as well as attending Board and Committee related meetings, to get a real feel for the business, it was a clear ‘no’ they should not arrive unannounced. It was considered discourteous and demonstrated a lack of trust if a Non-Executive Director did this.

It was stated that by all means sit in on meetings, but by invitation only. A NED should also walk about the business, speak with employees, and get to know the business and the culture.

The discussion expanded to encompass the values and culture of the organisation. Organisations should have a Director responsible for Values.

  1. There was a question about how you keep NEDs strategic and stop them interfering in operational matters.

Both NEDs and School Governors should maintain a strategic role. Sir EP raised the point that when you move from a Chief Executive role to Chairman of the Board you should change to more of a listening role.

An example was given of inviting employees to attend a strategy meeting about how to overcome a particular situation. An idea put forward by an employee at one of these meetings was followed through.

  1. A point was raised that there is concern by the questioner about the rigour with which Non-Execs are selected. The case of the Co-op hiring Paul Flowers illustrates the issue in question ‘how do you sense that nepotism is being overcome?’

The response to this question was to be rigorous and disciplined in NED/Governor recruitment processes and maintain ‘best practice’.

  1. A final question was raised as to ‘why do potentially good Non-Execs resign? How can you avoid getting to that point?’

Responses to this included –

  • Keep them engaged through providing continuous professional development and team building events.
  • There are some occasions when a NED ‘falls out of love with the organisation’ and they have ‘done their time’.
  • It is important that a formal induction takes place for new School Governors and NEDs to ensure that they are clear about their role from the outset.

An observation was made that you can find NED role models but it is hard to find a School Governor role model.

Written by Jon Webb, Webb Development