BCKR Event: Marcus Agius – the Chairman’s perspective
There was a positive message for BCKR members this week from Marcus Agius, former chairman of BAA and Barclays and former SID at the BBC. Marcus currently chairs both the trustees and friends of the Royal Botanic Gardens, Kew. He talked about being Chairman of Barclays during the financial crisis and had much to say about the future for lawyers wanting to take a place in the boardroom.
Here is a summary of his talk;
Notes from Marcus Agius Event
We all need to think through from first principles what the board is there to do – to help the corporation succeed – successful enterprises are the aim.
After the great financial crisis (GFC) there’s a risk, in the backlash and governance reviews that have followed (and which needed to follow), that the world (and potentially boards) lose sight of this.
The CEO has by far the hardest task. Regulation and competition increase regularly, to make life even more difficult. The CEO has to take the company forward, and be bold. The best companies are the boldest, and in forming strategy the CEO doesn’t know for certain if the strategy is going to work. The fellow directors are there to help him – through rigorous analysis and direct challenge. Don’t stop until you have all the answers.
The Chairman’s job is to promote challenge. Challenge should be not only permissible but should also be desired by the Executive team. But you cannot simply run a business by saying ‘stop, it’s too risky’. Boards must ask the questions, satisfy themselves and make clear decisions.
Once the strategy is resolved, the directors should move from being critical friends to being champions of the executive and of the plan. That’s when great things can become possible – when the board is aligned in support of the executive team and the plan. There are some NEDs who just shouldn’t be there – the sort who always want to hedge their bets, looking to their own position and even taking a perverse pleasure in seeing the CEO fail. This is not right. NEDs are not meant to be spies in the camp, spotting fault and being negative in their analysis, they are there to support.
How to ensure good governance: ensure that all stakeholders are being properly served. During the GFC, oversight was inadequate, internal systems were not right and things happened that shouldn’t have been able to happen (for example the LIBOR scandal). No one had thought through what might go wrong, and you need people who can think through risks and consequences. Lawyers have the perfect mindset to do that. What might go wrong, what are the consequences? The ability to think like that is of great use in the boardroom. Not all Board members could, or should, have that mindset but some must. Plus, with more regulation than ever before – well-trained lawyers are as well-placed if not better than most, to make those judgments. Someone trained to be enquiring, cynical. The board’s primary motive must be getting things right, but avoiding getting things wrong is also very important.
What does a Chairman want from board members? Participation – you want the NEDs to be part of the process, part of the decisions. Individuals should play to their strengths and make a contribution only when they have something to say. You want them to be fearless, but not irritating, in pursuit of an important point. The Chairman needs to be sensitive to the risk of the board members falling into groupthink. Equally, once a decision is made, the board needs a strong sense of collective responsibility. And then act like a true champion of the agreed plan.
And charity boards? The boards of charities are driven by the same factors. You are seeking success for the organisation. The KPIs might be different but they are all in some sense financial businesses. As government funding reduces, there needs to be an increase in commercialism and entrepreneurialism. Making applications to grant funding bodies is critical. That is a very competitive process. The trustees at Kew (where I chair the Trustees) are digging into their skill bank to assist all of this.
Chairman’s role: He or she is the ‘conductor’ of the board but that’s not his most important role. The Chairman must be the CEOs strongest supporter but equally must be prepared to fire him if needed. The Chairman must be acutely sensitive to the CEOs moods, what pressure he is under – whether issues are becoming serious, whether the CEO is fighting the right battles etc. There needs to be very frequent dialogue between Chair and CEO…. the role is champion, enabler, critic and occasional executioner “. There should be no secrets between the CEO and the chairman.
He needs too to have a very good understanding of strengths and weaknesses around the board table, who wants to speak out and how they feel. He needs extraordinary interpersonal and enabling skills, he’s there to help his fellow directors, earning their trust and respect. They are not there to help him, we are all there to hip the business.
How involved should the board be: Twice a year he had lunch or breakfast with each individual director, to hear individual views and pass on thoughts on how they are doing as NEDs. Important to meet outside the board too – dinners, board lunches, ‘forced socialisation’, to become part of a team. He insisted that NEDs sat in different places at each board meeting to avoid cliques and directors becoming ostracized. It is vital to keep people informed. This makes it harder for any individual to turn renegade, so keeps the board unified.
Benefits of having lawyer on your board: Having someone who is trained to be cynical, probing, is good. A good lawyer will think about what could go wrong and find a way of preventing it. A lawyer’s strengths in assessing risk are increasingly important where the risk register and reputational management are high on board agendas.
If ever there was a time to address the lack of lawyers on boards it is NOW.