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A 'Thumbs Down' For City Non-Executive Positions ?

Posted on June 18, 2015 at 10:15 AM

When you make things harder - in terms of scrutiny, accountability and standards - it can put people off thinking of board positions as a great way to fund a lifestyle.

That isn't quite the way it is presented. But in a release entitled ‘Walking the Tightrope of Board Responsibility – a Difficult Balancing Act’,it is suggested that the introduction of the  UK's ‘Senior Managers’ Regime’ next year could act as a deterrent to AND lead to a narrowing of experienced and capable business people considering non-executive directorships at leading financial services companies.

The City gets a big ‘thumbs down’, says Advanced Boardroom Excellence (ABE), a board effectiveness consultancy, and Tyzack Partners, the international executive search firm, making the point that the financial services sector could be in for a shock when it comes to recruiting new blood from 2016 onwards.

In the wake of the announcement of new rules to be introduced by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to hold non-executive directors (NEDs) to account, headhunters return to the issue of boardroom pay.

 “Our research suggests that the appeal of NED roles in heavily regulated industries, especially financial services, is falling. This, together with remuneration which is not keeping pace with the responsibilities, means the City could be caught flat-footed when the new regulations come into force next year. With the credibility question of more ex-bankers overseeing our financial service companies we should be looking for greater diversity not a narrowing of the NED base in Financial Services” says Helen Pitcher, Chairman of ABE.


Their research says: "with participants expressing concern that NED remuneration already lags behind the commitment, responsibilities and personal reputational risk of the role, the thorny issue of boardroom pay looks set to return as the City comes to terms with the concept of greater personal liability. "(My emphasis).

Oh. But the whole problem with the City is that it has shown a glaring inability to come to terms with the concept of personal liability at all. How is paying people more going to encourage that?

“A side-effect of ‘regulation creep’ is a potential trio of dysfunctional outcomes: An upward pressure on higher board fees, which in turn increases the already significantly high costs of corporate governance, with a dwindling pool of willing, experienced and credible candidates” says , suggests David Dumeresque, Partner at Tyzack.

He also suggests that “the ‘Senior Managers’ Regime’ will make anyone interested in starting their NED career in financial services think twice, just by looking at the serious liabilities they will face as they become more senior."

I do believe that is entirely what the new emphasis on ethics and behaviour in financial services is all about.

But clearly, headhunters are going to have to work a lot harder to find the right candidates for a financial services sector that is fit for purpose. That means their own fee margins might well be under pressure.

City appointments, City 'networking' , City headhunters: it's a great circle of money that has been going round and round quite happily - only now it might be in for a shock.

Categories: Governance, Appointments, Accountability