Being
appoin`ted a non-executive director to the right company can be a shrewd career
development move but as Rob McLuhan discovers HR professionals, who often lack
actual board experience, may need to work harder than most to be asked
A
non-executive directorship used to be thought of as a perk for retiring City
chairmen or a bolthole for sacked Tory cabinet ministers. These days it is
regarded as a serious job, and one that any senior professional can aspire to
as a means to broaden his or her horizons.
Look
around at the shambles that some companies seem to create and it is quickly
apparent that non-executive directors have an important monitoring role to
play. Their impartial advice can help avoid causing public outrage with
ill-advised bonuses to directors (Marks & Spencer), actions that threaten
the environment (Shell with Brent Spar), or disastrous negligence (Barings
Bank).
It
is to help steer clear of these pitfalls that Stock Exchange regulations insist
upon an objective presence on the board for publicly quoted companies. This is
also recommended by the Combined Code of corporate governance commissions
carried out during the last decade, which urges that no less than a third of
the board should consist of non-executives.
The
Institute of Directors says companies – both listed and unlisted – are
voluntarily exceeding this level to around 40 per cent, while the number of
companies with non-executive directors has increased to 60 per cent.
A
survey by the Reward Group shows average earnings by a non-executive director
running at around £160 a day, and specialist recruiters say the job can bring
in £15-25,000 a year – more in large organisations. In the US there is a trend
to pay with share options rather than a flat fee, although that practice has
attracted controversy in the UK as likely to put objectivity at risk.
At
first sight this looks like money for jam. A non-executive director is expected
mainly to show up for board meetings, which are typically held once a month –
fewer in some companies. But a closer look shows the position can actually be
quite onerous.
"It’s
a difficult role to perform," says Daniel Summerfield, corporate
governance executive at the Institute of Directors. "Non-executive
directors have to maintain distance from the organisation because they are
bringing a wider perspective, but they have also to keep their finger on the
pulse."
That
means getting to know the issues, keeping up with the minutes of board
meetings, chairing committees, and perhaps hobnobbing with important clients.
All these activities can seriously cut into regular job hours, which is why
most working professionals would not normally hold more than one such position
at a time. Another potential drawback is the responsibility: under law the non-executive
team is held equally liable for any criminal or negligent activity.
Thorny
issues that could engage a non-executive director might be how to handle a bid
for the company that goes against the personal interests of the directors, or a
board appointment that is not working out, as well as disagreements to do with
board succession and remuneration.
But
non-executive directors can also help set strategy, particularly if they have
relevant experience. They may be valued for their City, institutional or even
government contacts. And they may have an understanding of issues that relate
to changes that a company is going through, for instance globalisation or the
implementation of major new IT systems.
"We
say to clients that we will try to find someone who has experienced what they
are going through," says Patrick Dunne, director of venture capital
company 3i. "That particularly applies to start-up companies, when the
real world intervenes and they have to adapt."
Experience
of HR can be useful to a company that is involved in recruitment issues such as
Internet jobsite StepStone (see box). However, this is relatively unusual.
Hanson Green, which specialises in the hiring of non-executive directors, says
there is not much demand from large listed organisations for HR professionals,
although it does make placements in smaller companies.
"The
difficulty is that clients want someone with an operational background,"
says Hanson Green director David Treadwell. "I personally believe HR
people are equally well qualified as managing, marketing or finance directors,
but many companies perceive that this is not the case."
Board
membership is usually a prerequisite for large listed organisations, and here
again HR professionals are likely to be at a disadvantage since so few have
attained this.
However,
those who have general managerial experience outside the function could be
attractive to smaller companies.
A
key job for non-executive directors is to chair the remuneration, nomination
and audit committees, and the first two at least have a special relevance to
HR. Remuneration can be particularly sensitive, given the public scorn a
company can attract if its payment of directors is seen to be excessive.
The
job also requires a particular set of personal qualities. Treadwell says,
"The people we approach are senior, established in their roles, and have
the technical skills. They understand how boards work, and are financially
literate."
"But
they also have to have skills you can’t teach – tact, a sense of humour, and
the ability to influence without commanding, and if these are absent they are
unlikely to succeed in the role." Some managing directors make poor
non-executive directors because they can’t stop taking control, he adds.
And
they should be ruthless where the occasion demands. When the chairman and chief
executive of Cable & Wireless were at loggerheads a few years ago, the
non-executive team stepped in and removed them both.
Assuming
it is possible to acquire a non-executive directorship, the benefits in terms of
personal development are generally acknowledged.
"It
could have important advantages for a person’s career, improving their
credibility and raising their profile," says John Stork, managing partner
of Stork & May, career strategy consultants for senior executives.
"Also, it widens their contacts and gives them more options were they to
leave that job."
The
money is not good enough to be a motivation, says 3i’s Dunne, except for those
who get involved in an entrepreneurial venture with potentially lucrative share
options. However, personal development would be a good reason for taking it on,
he agrees.
"Alternatively,
you might want to do it just for the fun of it, as an interesting and
challenging to do," he suggests.
But
given the difficulties HR professionals have getting onto the board of their
own companies, should one even consider trying for a non-executive position
somewhere else?
Absolutely,
says Dunne. "If you are with a well recognised high-performing company,
it’s not unrealistic, as long as you are absolutely clear why you want to do it
and what you can contribute."
As
to acquiring a position, some people may be approached by headhunters while
others will themselves initiate the process by sending their CV to a specialist
recruitment agency. But at this level it is word-of-mouth that often brings
results.
"Most
people get appointed through their networks they have or build," says
Dunne. "If you really want to do this and start talking to people, you
will probably get there. Then once you have experience, other opportunities
will quickly arise."
Role
can offer great career development opportunities
Lesley
James former HR director, Tesco.
Non-executive directorships: Selfridges, Care UK, West Bromwich Building Society,
DTI Insolvency Service Steering Board.
"If
I had not been on the board of Tesco I don’t believe I would have been sought
out to join Selfridges as a non-executive. Having got that appointment I was
approached by Care UK, which provides residential homes for the elderly, and
West Bromwich Building Society.
"The
contribution I make comes less from my understanding of HR than from my general
business experience. In Tesco the job was about changing culture, expansion,
and mergers and acquisitions, and Selfridges was going through a demerger when
I joined.
"Care
was interested in my background in a leading service company. The same is true
of West Bromwich, it is keen to provide fantastic customer service, and where
better to go for insights than someone from Tesco? With the DTI the need was
for an understanding of how the private sector operates.
"I
also chair the staff policy committee of the Open University, am a trustee of a
children’s charity, and sit on a DTI advisory panel on partnership funding. These
are unpaid non-executive roles and are as good a development opportunity for HR
professionals to consider as anything."
Michael
Maher, former group HR director of food company Dalgety, now chairman of print
and packaging specialist Jarvis Porter.
Until recently he held non-executive directorships with StepStone.com,
Motivano.com, and Jarvis Porter.
"Most
companies will look for other skills besides HR in their non-executive
directors. I have spent eight of the last 20 years in general management. StepStone
saw itself as unique in having an HR professional on its board. However, I was
not there to give internal HR advice, but for my understanding of the
recruitment and corporate market.
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"HR
professionals on executive committees tend to think of themselves as being
there to do an HR job. I believe that’s the complete opposite of what’s needed,
and is why they don’t get on the board of public companies that frequently.
It’s not about being an excellent HR technician, but being a good general
manager, and applying intellect across a wide area of responsibility.
"My
main responsibility in both StepStone and Jarvis Porter was as chairman of the
remuneration committee. I was eventually appointed executive chairman of Jarvis
Porter, which meant giving up my non-executive roles. As chairman I have
appointed two non-executives into Jarvis Porter in the last 12 months. I have
looked for people with complementary skills, recruiting one with an excellent
sales and marketing background and another with experience of mergers and
acquisitions."
