Nick Vetch: Pick your NED role with care
We recently welcomed Nick Vetch to BCKR. Nick is on the board of several companies and is a trustee at Bedales School and also of The Fund for Global Human Rights. He has NEDs and is a NED. His experience of being a NED for a commercial organisation versus a non-commercial is that there is some commonality – dependent on the size and sophistication of the organisation. Large organisations differ from smaller ones. In general, the NGO sector is some way behind on a corporate governance and organisational front.
A major trap around becoming a NED is that you either end out running the organisation or having no role at all.
Running it: this happens when you have misconceived organisations with poor management and no vision.
No role: when you become a non-exec of an organisation where you have no influence either because they are so big that nobody has influence and you attend endless board meetings and talk of nothing but corporate governance. Can be frustrating and boring.
So pick carefully and don’t fall into the trap of becoming too involved or unable to make a difference. There is a sweet spot in between where organisations are looking for involvement from outsiders.
Executives generally have NEDs to meet their regulatory obligations.
- Some view NEDs in the role of policemen, there to represent the shareholders, and are viewed as an extraneous break on activities like pay etc.
- The more constructive view is that NEDs are there as sounding boards.
Since 2008 Nick has probably made six really big important strategic decisions. Those decisions were critical to where Big Yellow have ended up in the present day. So – Nick wants enablers of better decision making around him for those critical times.
For instance – if Nick were to call Tim Clark – it would be about making a big decision on which he is looking for a different mind set and challenge. He is not expecting to be challenged on most of the day to day decisions by his NEDs as they don’t have the technical expertise and he can buy that in. He certainly doesn’t look to Tim for legal advice. It is his value judgement, common sense, probity and having confidence in Tim’s moral compass.
The only exception to this is the head of audit.
When you look at the board and the dynamics, how do you choose who to join your board?
The starting point would have to be as fundamental as you have got to like them. He might have started with skill sets but has evolved into choosing diversity of thought over and above everything else.
The traps of the corporate life are that you end up in the same school of thought – stock market politics etc. – but it can result in ending up in silos. You want someone who is not in the same silo.
Generally boards put a high value on sector experience. Nick puts no stock in that. You should have that expertise in-house. Big Yellow is a curious mix of public company and founder-led. It has its own style. It is not as formal as most corporates. They are certainly not sloppy when it comes to corporate governance but they do have a more entrepreneurial approach. It would be very different in a big FTSE company.
How do you assess ability of your NEDs?
You make your best guess. Will they strike the right balance of being challenging, but not for the sake of it.
How does that compare to your role as a NED?
Nick is a self-confessed control freak so does find the NED role challenging. Fund for Global Human Rights does wonderful work but business wise they are quite primitive. So Nick feels he can make a real difference there. His biggest challenge is not charging in and taking over.
How do you find the right role? A lot of organisations just want NEDs to tick the box. If you want to make a difference usually your network is your best resource.
How do you respect the challenge from your NEDs on those big decisions if they don’t have sector expertise?
NEDs can’t guarantee right decisions are made. It is the collective brain power that improves the chances of making the right decision. You probably make the right decision 65% of the time. You want to make sure that those six big decisions are in that 65%.
How to you avoid the traps and make good assessments of companies – e.g. Carillion?
Traps can be glaringly obvious in retrospect, though would you really invest in a contractor with a 3% margin? You need to do your due diligence. Ask yourself ‘would I invest in this?’ If you had rung insiders at Carillion you would have found out something was up.
How do you prepare for an interview?
- Do your due diligence e.g. ring insiders, brokers & others.
- Ask questions so that you understand the DNA of the business.
What is your view on taking on younger NEDs?
You need youth on the board to understand fast moving areas like technology and change.
How do you approach organisations you want to get into?
- Luck plays a big role. The more work you put in, the luckier you get.
- Don’t focus on your legal skills but how you can help executives come to better decisions. Emphasise your common sense skills and strategic thinking.
- Your experience as a lawyer can bring different thinking and approaches into the board room. The way you think can have a very distinct impact.
- Lawyers have a special ability to structure thought.