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FTSE Boardrooms: World Weary But Not Looking In The Mirror

Posted on December 12, 2015 at 11:55 AM

Boardrooms of the FTSE 350 appear to be so concerned about the world outside that they are not paying atttention to matters essential to the workings of their own businesses.

Economic risk is a top concern and Brexit is viewed by most as damaging to business, says research just out.

But just 49% of respondents to the FT-ICSA bi-annual Boardroom Bellwether survey of the FTSE 350 have  a written board succession plan, despite the urgency that has been given to the need for such planning from a governance point of view by both, the Financial Reporting Council (FRC) and by institutional investors. 

Only 37% of respondents feel that their executive pipeline provides a sustainable pool of talented and diverse board members. But, apart from the flurry of interest in the last few years around the UK government's inititaive for gender diversity, there is little evidence of concern around the lack of wider ethnic and racial diversity.

A quarter - 25% - believe their boards to be ethnically diverse. I would love to see a screen shot of the composition of those boards.

‘Considering the pressure to improve diversity and given the current FRC discussion document on succession planning, we might expect more nomination committees to take a proactive role in planning board composition,’ says Peter Swabey, Policy & Research Director at ICSA. ‘

“The absence of a considered succession plan can undermine a company’s effectiveness and pose a significant risk" as David Styles, Director, Corporate Governance Codes and Standards Division at the FRC, has repeatedly pointed out in recent monhts.

There appears to be no absence of fear in the boardroom. As many as 82% believe the threat of cyber attack is increasing, and three quarters have assessed and are mitigating this rise, with external help if needed, says the research. Certainly, a Manpower survey recently revealed that cybersecurity experts are charging £10,000 a day to help the UK's top firms.

But despite the concerns on Brexit, only 26% of boards are considering the implications of a UK exit and only 4% are prepared to speak out publicly for or against, according to the research. This seems to suggest that 'sitting on the fence' is also a pre-requisite for entering the UK's boardrooms.

As a hard-hitting piece of research with a wealth of material by Grant Thornton just out - and covered briefly by me on Forbes yesterday - reveals - some of these are 'not-so-independent' boardrooms.

Surely they should be considering organisational resilience, rather than merely focusing on day to day risk ?

Ah, yes - about risk. The Strategic Report regulations in the UK  were developed in 2014 "with the hope of improving business reporting in terms of alignment, clarity and focus" says the Grant Thornton Governance Institute's annual analysis of the governance practices of the FTSE 350.

"Despite this, only 41% of companies link strategy, key performance indictaors and strategic risk; 54% of companies do not report their CSR approach holistically with strategy and business model; and only 14% of companies link remuneration to strategic approach within the strategic report" it says. (my emphasis)

A final note of damnation: 24% of the FTSE 350 gave the same risk disclosures as last year (I believe in some cases they were verbatim) - despite continuing volatility and a focus on business risk and controls.

As Sir Winfried Bischoff, Chairman of the FRC says, giving the regulator's perspective at the start of the Grant Thornton analysis : this finding "shows there is more work to do here."

Categories: Behaviour, Governance, Risk