The debate: Choosing non-execs
Non-executive director appointments can make or break a business, but how are they made? John Collier points to the 'old boy' network, but Peter Bracken sees it differently.
By John Collier
Do you really want to be an independent non-executive director of a listed company?
Think hard before you answer because not only are there all the responsibilities, legal liabilities and risks to your reputation that you read about, but you will probably have to work very, very hard for several months to find the right company.
This seems strange. After all, the press is full of the need for independent oversight of our listed companies.
There are said to be too few of them but you wouldn’t think so if the current recruitment market is anything to go by.
You might think the most obvious place to start looking for a non-executive directorship is in the press. But you would be wrong. You will find there are almost no adverts for non-execs of listed companies.
The next place to look might be one of the specialist agencies claiming to promote the role of non-executive directors and providing a service that matches candidates who have the appropriate skills and experience with companies wanting non-execs. But most only work for whoever pays a fee to them. Nothing wrong in that but it does mean that in most cases the best you can expect is to have your name and CV put on a database.
If you have still drawn a blank, as is most likely, you might then continue your quest by writing to the search firms that claim to help companies find non-execs. There are literally hundreds of these. But again, they mainly work for the corporate client who pays the bill and most clients don’t use search firms to help them find their non-execs anyway. Which leaves the direct approach to the chairman of a company where you think you might have something to offer. But that approach is often flawed, too.
On the other hand if you know the chairman and he or she knows you too then you are in with a chance. And there you have it. You are forced to use the old-boy network which seems to be how most UK non-execs are found.
We’ll have to see what Derek Higgs has to say about all this but he needs to recognise the current way in which independent non-execs are found leaves much room for improvement.
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- John Collier is chartered accountant and former secretary general of the ICAEW.
Senior executive and non-executive director appointments can make or break a business.
The premium on getting the selection decision right is, therefore, substantial.
Today, shareholders demand that proper due diligence is undertaken to diminish the risk to businesses when making these decisions.
It is no surprise therefore that leading organisations nearly always retain consultants in executive search to help them prepare a brief describing clearly the balance of experience and skills required for the role, against which profiles of candidates and their performance at interview will be judged.
This process is the antithesis of practices that characterised high-level recruitment 20 years ago, when it was commonplace for personal recommendations to short-circuit recruitment guidelines. Then, the ‘gene pool’ of non-execs was often restricted to ‘the usual suspects’ – the great and the good who brought prestige to a board but little in the way of commercial acumen, vision, or relevant expertise.
Today, this practice is no longer thought appropriate. It’s not difficult to see why. All types of business from all sectors confront multi-dimensional change. New technologies, for example, are challenging established business models.
Similarly, e-business impinges upon all organisations, everywhere such that companies are now required to manage mature positions at the same time as fostering entrepreneurial skills to exploit new opportunities.
Executive search consultants have access to extensive networks of people and are charged with finding the best individual for the role through their rich contact database.
For this reason, boards – if they are to be successful – must have the diversity of high level skills, abilities or vision necessary to meet these challenges, at either executive or non-executive levels.
The board that functions well and can contribute a wide range of relevant strategic skills in a disciplined fashion is clearly at a competitive advantage.
- Peter Bracken is group head of communications at recruitment consultants Whitehead Mann.