The Walker Report rules out jobs for execs

I’m sure many of you have read the Walker Report, or parts of it, and I’m sure you’ve seen the FRC’s consul­tation document. These tomes cover a number of areas in corporate governance. A reasonable amount of all this won’t trouble you, for all or most of your career. But there are parts of it that will, and they focus on the role of the audit committee and its relationship with risk.

There are two issues in particular. First, the role of the audit committee chair adds up to about 20 days a year. If one assumes that two-thirds of these are working days and the rest weekend, it is safe to assume that an executive CFO can take on these roles. That’s a great thing, because taking on an NED role as an executive is a brilliant way of gaining experience. In a world where CFOs can make the move to chairmen, early experience as an NED is advantageous.

However, there are moves to increase the amount of time spent on this role and, for those in financial services, this will move to 36 days. That’s too much for someone working in a full-time role and that effectively rules out those roles for executives. In addition, there is the debate about a risk committee separate from the audit committee. While this has not been concluded, some businesses are exploring the concept and are debating who would chair it. Which­ever way it goes, it’s likely to add up to more work for the audit chair and that rules those roles out for a number of executive CFOs.

The second issue is arguably worse. A large number of chairmen are well aware that the role of an FD has become too onerous, and that the role of the audit chair is also too demanding. As a result, when asked, they say their preference is for former FDs to chair their audit committee. They know this way they will have an experienced and available resource who can drop most things to get to a meeting, as opposed to someone who might be the other side of the world on business.

So what’s the solution? As an exec, look at smaller businesses to join as an NED as they will require less time. As a chairman, think about appointing FDs to the board, but not asking them to chair the audit committee. Don’t follow the ‘comply at all cost’ bandwagon and keep the time commitment at a level with which everyone is happy.

Mark Freebairn is a partner at Odgers Berndtson.