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Making A Leap In Thinking About Boardrooms

Posted on December 30, 2014 at 11:30 AM

So.  It seems there are a few changes afoot in Europe's boardrooms to better cope with a rapidly changing world.

The Hay Group's study of non-executive directors in 2014 has found boards to be much more international. The average percentage of local directors has dropped - just a little - (from 66% to 64%) but the average percentage of directors with the majority of their career in the country where the company is headquartered has dropped further - from 62% to 55%.

They also decided to test the hypothesis that European boards tend to be populated by the same set of directors - and decided it isn't true. "Ony 13% of directors sit on more than one large European corporate board" says the study.

Both those observations are mildly interesting, but not that exciting.

On the other hand, risk committees are popping up everywhere - they went from 12% last year to 22% this year. Remuneration committees are beginning to be more valued as their scope changes."We now see about one-third of remuneration committees with a scope beyond simply the pay and ratios of executives" says Carl Sjostrom, European regional director of executive reward at Hay Group.

And why not ? Instead of focusing only on paying-by-numbers, remuneration committees are at last, it seems, beginning to think about performance management. With investors loudly muttering 'succession planning' in the wings, boardrooms need to listen.

Reports like this one are useful upto a point. But they inevitably look for the uniform trend -not the curling edges of thought which are the harbingers of change.

Hays notes, for example, that pay structures are changing, "but not in a uniform way." "Some countries, like Germany, continue to see a significant share of companies use variable compensation, in sharp contrast to practices in countries like the UK" it says.

Changing boardrooms require fresh thinking, and in a digital world, it is starting to come from all sorts of directions. 

Last month saw the publication of an independent review commissioned by the Labour Party and written by an independent panel of more than 20 advisers and volunteers on ways to improve trust and engagement between the UK government and its digital citizens. 

Making Digital Government Work For Everyone explores how better to use technology and digital services, with a focus on inclusion, training and the creation of an ethical framework for government, business and citizens.

"As technology becomes ubiquitous the ethical dimension becomes very important, both nationally and internationally, and the UK has a chance to show real leadership through an ethics body like this. It's an interesting idea and not just for the people, but for companies and for countries to have a potential moral authority"  Saul Klein, partner at Index Ventures, told The Guardian.

The notion that initiatives between a government, its citizens and the private sector can be connected through joined-up thinking and direction will seem like a nonsense to anyone who prefers the comfort of the status quo. It is also absolutely essential to achieve true societal inclusion.

"The government has to recognise that technology is no longer a subsection of a department but part of every sector" says the review. Boardrooms need to make the same leap. In order to do that they are going to have to open their doors to people who don't look like the current inhabitants, or necessarily come from the same backgrounds.

Evidence of further fresh thinking comes from Betsy Atkins, entrepeneur and CEO, writing on Forbes on Why It's Time For a Board-Level CyberSecurity Committee

Ms Atkins makes a critical first point: the need for the 'de-mystification' of cyber security. Not only is there a crying need to do this, but in the UK we appear to have a tendency not only to mystify that which we do not understand or find threatening, but also that which we would like to keep as it 'always has been.' Another word for that is 'elitism.'

Another topic ripe for demystification: worker - or stakeholder, pick your language - representation on boards. It's an obvious step towards inclusion and away from groupthink. But we persist in erroneous repetition along the lines of 'they only do it in Germany and that's different, because .....boardrooms are structured differently and.....they are German."

There are NINETEEN countries in Europe with some form of worker representation in the boardroom. 

2014 has seen a rising tide of debate around whether corporate governance is working in the UK.  The New Year begins with the Policy Network's event on the Responsibilities of Boards.  It's a good way to start 2015.

Happy New Year and thank you for reading.


Categories: Governance, Technology, Inclusion