Case Study - Challenging the Chairman

The Problem

A London Market firm asked us to undertake a Board Effectiveness Review. The purpose was part of their triennial cycle of good governance.They were also due a regulatory visit and knew the regulators had some concerns about the rigorousness of the Board.

The Board comprised:

• 3 Non-Executive Directors, 2 who represented an overseas part-owner parent company and one of which was Chairman and a major shareholder himself
• 3 Independent Non-Executives
• 5 Executive Directors including the CEO, FD, CRO, Head of Legal and CUO

The solution

We proposed a four stage review:-

Stage 1: Desk based research to check the governance structure in place, the reality of what was happening and how this was recorded

Stage 2: A questionnaire to highlight any areas of concern and open up thinking in preparation for interviews

Stage 3: Individual interviews to explore any concerns and dive deeper into questionnaire responses

Stage 4: Board and Committees’ Observation to see the Board and Committees in action The desk based research showed that the chairman was very involved.

The agenda was very high level and there were always many ‘tabled’ items, or AOB discussions instigated by the Chairman. The minutes conveyed a very high level of input from the Chairman. The questionnaire showed that there was satisfaction with how collegiate the Board was, but conversely frustration at the leadership by the Chairman.

In the interviews with the Board members expressed their frustration at the lack of challenge and seriousness, with much being discussed ‘on a whim’.Papers were always late and of poor quality. They also felt that the lines separating governance and oversight/delegation were often overstepped, especially by the Chairman and the CEO was therefore disempowered. These points were borne out by the Board and committee observations.

The Chairman was enjoying his retirement and coming to see his firm and friends, without consideration for regulatory requirements or what the company needed in order to grow and be sustainable, with a fully functioning Board.

We recommended that the agenda be reviewed with an annual cycle of agenda items, both strategic, risk, regulatory and operational, and deep dives on a cycle. We also recommended that there were strict guidelines on Board papers in terms of content, layout and timeliness to reduce the amount of tabled items. We recommended that the INEDs were rotated off the Board as two had served over 9 years and one was a personal friend of the Chairman.

From a Board composition perspective we questioned whether they were still the right fit for what the Board needed going forward. We also spoke privately to the Chairman about empowering the CEO and entrusting him with the business allowing him to run the company.

The results

The Board agreed to our recommendations and we worked with the firm to design appropriate Board paper in house style for them, with a rolling agenda. We worked with the firm to identify the best Board composition for them and the INEDs were gradually changed and the new INEDs carefully chosen to fit culture and what the business needed going forward. The Chairman also saw how he was not helping his own firm and had not considered the impact of his over-involvement.

One year on, the Board has timely papers, which are well structured set within a robust agenda that is followed appropriately. One INED was changed six months ago and another is shortly to change, with the new one selected. The third will change in a year’s time. The Chairman has instigated more pre-Board and post-Board dinners and lunches so that he still gets the social interaction and the feeling of a level of involvement he enjoys, but has fully empowered the CEO who has really grown in the role.

If you think we can help you with your Board reporting please email info@bpandeglobal.com or call +44 (0) 20 7764 0721

BP&E Global – Board Performance and Effectiveness