Page 85




Non-executive directors must learn how to challenge executives

Speaking truth to power Piers Cain is a management consultant

The UK-based construction giant Carillion the role of boards in ensuring that the right collapsed due to financial difficulties in leadership is in place for an organization to 2018. A year later, the café chain Patisserie fulfil its mission. Yes, approving a strategy Valerie went into administration, due to aligned to the mission, keeping an eye on alleged accounting fraud. In both cases, one risk, and making sure there is the capability of the first questions that many observers to execute are important: but in the end, asked was: “Why didn’t the non-executive it all comes down to hiring and firing. In a directors (NEDs) spot something was board battle, it is ‘kill or be killed’. wrong?” According to PwC, NEDs on Critics of today’s governance practices FTSE-listed companies can expect to earn a claim that executive teams too often get base fee of £53,000. The question for many away with dodgy decisions because NEDs critics is: are NEDs really worth the money? fail to challenge the information they A new book, Boards: A Practical receive. Remarkably, none of the crises Perspective, offers guidance on maximizing considered in the book came to light, thanks the value added by NEDs. It’s written by to NEDs’ forensic skills. Dunne alludes to Patrick Dunne, formerly a senior leader the importance of a director’s reputation, in investment firm 3i: a and the risk they run should visiting professor at Cranfield they fail to act properly. Non-execs School of Management, he But what happens when is comfortable drawing on NEDs aren’t motivated by need research to make his points, ‘antennae’ to detect their ‘caste-consciousness’? but his real strength as a Legislators have tried to when things may boardroom guide lies in his compensate by increasing not be quite as they legal penalties, but the own extensive experience. As one would expect unintended consequence has seem of a handbook, there are been an increase in ‘cover my sections on the ‘plumbing’ of back’ behaviour, avoidance boards: the legal basics (focused on the UK), of responsibility, and the use of lawyers. I structures, roles, and the relationship with am not convinced the public believes boards the executive. The biggest take-away is the are behaving better as a result. need for directors to develop ‘antennae’: Likewise, despite acknowledging a finely tuned sensitivity to signals from widespread criticism of excessive executive others, like mood or attitude, which may pay and the ‘ratchet effect’ of remuneration indicate that things in the business are not surveys, Dunne does not mention the quite as they are presented by the executive. emergence of good practices that might Where Dunne’s book suddenly takes off effectively curb this problem. We must is its substantial section on board dilemmas. conclude either that they do not exist, or Real-life case studies are presented in that there is little appetite at board level for scenario form, outlining the options for addressing the issue. action before revealing which was selected – Dunne is an excellent guide to the ethos and the results. It is striking that in virtually and skills needed to be a good director, yet every case, someone ended up being fired: he offers little comfort for those hoping for the past-it chairman, the chief executive changes in the way organizations are run. who treated company resources as personal — Boards: A Practical Perspective property, or the finance director who was Patrick Dunne (Governance Publishing and covering up irregularities. This underlines Information Services Ltd, 2019) Q2 2020 Dialogue