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Tuesday, December 06, 2005

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ACCOUNTANCY TODAY
 
The difficulty of sporting a chameleon
Alison Maitland
12/6/2005
 

          It takes an extraordinary balancing act to be an effective non-executive director (NED). The good ones are both watchdogs and supporters of the executive team; able to see the big picture and understand the detail; capable of commanding respect when they speak but also good at listening; objective and yet committed.
Small wonder, then, that a boardroom survey has come up with plenty of examples of how non-executive directors fall down. The weakest kind is the "nodding dog", who makes up the numbers on the board without challenging anything, according to the survey of 124 chairmen, chief executives and non-executive directors representing more than 500 UK boards.
Another irritant, uncovered in interviews by Whitehead Mann, the executive search firm, is the NED who is aggressively critical and undermines the executives without adding value.
"We had one non-exec who sat in board meetings with his calculator and challenged the calculations of the finance director," recalls an exasperated executive.
Non-executives who act as frustrated CEOs, always imposing their views, make themselves deeply unpopular with their boardroom colleagues. So do those who display sloppy thinking, demand too much detail, are rude or turn up late for meetings.
Susan Bloch, a Whitehead Mann partner and author of the report, "What Makes an Exceptional Non-Executive Director?", says it was useful to investigate both good and bad traits.
"Almost everybody has at some time experienced having a very irritating nonexecutive on the board," she says. "This can help the other board members ... learn what not to do."
At a time of growing demand for high-quality non-executive directors, the report highlights the contradictions inherent in the job. For example, boards want non-executives with experience of running a business, and thus of being in command, but they also want people who can bury their egos.
"Policemen, whistleblowers, challengers and supporters of a business, strategic experts. Often these attributes are mutually incompatible," says one director. "Not surprisingly, it is very hard to find these people."
Nick Prettejohn, departing chief executive of Lloyd's of London, says an outstanding non-executive "is good at maintaining distance to look at the executive process with a supportive but dispassionate perspective".
Alastair Lyons, chairman of Admiral, the motor insurer, comments: "An exceptional NED is ... adaptable in style and behaviour, with the ability to work with a lot of different people. NEDs would benefit from being more chameleon-like."
To find all these qualities, boards must look for directors with complementary skills and characteristics, says Ms Bloch.
"I don't think you can expect superman or superwoman. It's about how well you balance the board -- having someone with real depth of experience ... someone else who is visionary and creative, and someone else who is a really good ambassador."
Surprisingly, given the increased responsibility that non-executive directors are being asked to shoulder, the research finds that recruitment is still haphazard on some boards. "There was relatively little agreement in terms of a brief or specification for the role, which possibly resulted in the suboptimal appointment," says one chief financial officer.
Boards saddled with problem NEDs will find it hard to get rid of them. As one interviewee explains, even regular evaluation does not necessarily help.
"There is one director I work with who's a total pain, obstructive, difficult, not that bright and a nonstarter. I have seen external evaluations of boards take place but they take out the unpalatable stuff because they want to get the work again next year."
The transition from executive to non-executive director can be difficult, yet new recruits seem often to be left to fend for themselves. "It is concerning that fewer than one in three board directors were able to say whether they had helped their own NEDs to prepare for the role," says Ms Bloch.
In the most professional cases, induction is a three to six-month process run by the company secretary and tailored to the needs of the individual director, the research finds. But few of the 124 interviewees spoke of having a formal process of induction. "It was sort of taken for granted," says one director. "There was no clarity of what the role was."
Clearly, boards sometimes have only themselves to blame if they find there is a nodding dog rather than a watchdog at the table.
Under syndication arrangement with FE

 

 
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