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Bank Boards: Recycling The Men At The Top (Regardless Of Expertise)

Posted on October 14, 2015 at 4:50 PM

Banking expertise among chairmen of Europe's banks "remains at a relatively low level." Shock. And we are talking largely about men.

In fact, the average number of chairmen with banking expertise was a little over half in 2014, just slightly higher than in 2007, according to a report on the governance of Europe's 25 largest banks by London-based corporate governance firm Nestor Advisors.

John Plender responded in the Financial Times yesterday - and if you can't access via the link, here's a snippet:

 "This seems scarcely believable, especially since nearly two-thirds of the banks have changed chairmen since 2007. If the great financial crisis taught us anything about the governance of banks it was that boards need to be amply stocked with people who have a proper understanding of the business and of the nature of the risks that banks run. Sir David Walker, in his post-crisis review of corporate governance in UK banking, argued that the chairman of a bank board 'should bring a combination of relevant financial industry experience and a record of successful leadership capability in a significant board position'."

Quite. He also points to another important revelation: "Another striking finding in this survey is that 18% of the chairmen have a full-time executive position elsewhere compared with a mere 5% in 2007."

Now that is indeed, beyond belief. Did the financial crisis not teach us anything about focusing on the job at hand - instead of juggling far too many roles? And then there's the gender issue.

In March this year, I applauded the publication of the Cranfield 2015 Female FTSE report in this blog - saying

"It would also make sense to look hard at the tenure and record of the men. How many male non-executive directors have served over nine years in the FTSE 100 ? How many are chairmen - with established networks and loyal headhunters (who often also do their board evaluations) in tow?

Cranfield tells us (page 30 of the report); there are still 70 male NEDs - and nine female ones - who have served over nine years. Of those 70 male NEDS 21 are Chairmen.

As Susan Vinnicombe says: "It has taken many years for the debate on women on boards to be taken seriously."

Ultimately, there are a limited number of positions at the strategic top of business. For new blood, and diversity - including gender diversity - someone has to leave.

The ideas put forward by Cranfield seem an excellent place to begin, for the FTSE 100: enlarge board size by simply adding one woman to each board - and limit the tenure of directors."

I know - It's a bit depressing at this end too, when one starts quoting oneself.

But here's the thing. There's a little thing called FinTech in the air around the future of banking. And then there's the fact that the banking industry needs to come to serious grips with the fact that every business today is, indeed a digital business (to quote the man from Google).

It's not just a case of adding cybersecurity and digital expertise to boards - although that too, is taking time - probably because the headhunters have no clue where to find it in their familiar circles. It is all about looking at strategic direction with a digital filter on the lens - like Burberry did.

Nestor calls its report 'Work In Progress'. Hmm. All business is surely 'work in progress' but there is not much indication of progress in the way bank boardrooms are constructed. "Large boards seem more likely to have a strategy committee.....  In our peer group, as of 2014, five boards had established a strategy committee" it says.

Strategy committee needed, although forming committees is the kiss of death for innovation. But perhaps then that strategy committee could find a way to have someone on it, or reporting to it on a regular basis while not having to tick the boxes and jump through the hoops to be a non-executive director (NED) - who thinks digital ? Now that would be progress.

Categories: Chairmen, Behaviour, Appointments