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March 14, 2012 9:12 pm

Candidates reconsider joining boards

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The vast majority of the UK’s largest quoted companies believe that the reputational risk of being a board member is greater than it was even five years ago, the FT/ICSA Business Bellwether has found.

Beyond the boardroom, the findings suggested a striking degree of sangfroid about the fate of the eurozone, with almost half the companies that responded saying that they were doing nothing, or next to nothing, in preparation for the possibility that it might come to an end.



The Business Bellwether, run jointly by the Financial Times and the Institute of Chartered Secretaries and Administrators, canvassed the views of company secretaries from the FTSE 350 on a wide range of issues.

“Inevitably, not every company within the FTSE 350 responded,” said Seamus Gillen, ICSA director of policy, “but those that did cover a range of sectors and some of the biggest groups in the FTSE 100.”

“As such, the findings offer a telling view of the mood in the UK plc boardroom.”

That view is one of caution. According to the survey, 85 per cent of the FTSE 350 companies responding said the risk to a director’s good name was higher or much higher than it had been, while no one thought the danger to reputation had diminished.

In an apparently related finding, more than half said it was hard or very hard to recruit board members of the right calibre.

Sir Roger Carr, president of the CBI, the employers’ organisation, said the exposure of the banks in the financial crisis had highlighted the importance of having able and experienced non-executive directors but had also “made it increasingly evident that if something went wrong there was no hiding place”.

The consequence, he said, was that people had become more thoughtful about taking posts, and conscious that if they did take a board position, it would mean deep involvement.

Mr Gillen said that difficulty in recruiting the right candidates for board positions could jeopardise a group’s success. “If you don’t have a functioning board in place, then your chances of achieving your strategic objectives are much diminished,” he said.

Some executives believe that the pressure to find women candidates to be directors has added to the difficulty of recruitment. But it is clear that those pressures will, if anything, intensify.

“There’s a layer of very proven female talent whose only shortfall is missing boardroom experience,” Sir Roger said. “We just have to work a little harder to identify them and then work harder to bring their boardroom skills up to speed: it just requires more effort, but it’s worthwhile.”

When it came to boardroom conduct and corporate governance, the survey found that many companies did not see the UK’s stewardship regime, introduced in 2010, as particularly effective at encouraging more organised and transparent relationships with shareholders. More than three-quarters felt it had made no difference, while 23 per cent felt it had produced slight improvement.

Peter Montagnon, senior investment adviser at the Financial Reporting Council, which oversees the governance codes, said the stewardship code had won a high level of support and was intended to be incremental rather than producing an overnight transformation. He said the next step was “developing a change in behaviour on the part of investors”.

More broadly, the survey suggested that about four in 10 companies thought the euro was unlikely to break up in the medium term – though this was still a lower proportion than those saying they were doing little or nothing to prepare for this eventuality.

Sir Roger said for many companies the key point was not the possible fragmenting of the euro but the prospect of trading in tough European economic conditions.

“More of an issue is that even if the euro does hold together, then many southern European countries face a long and difficult journey, so it is important for UK companies to find ways of generating growth outside Europe,” he said.

The survey found that of companies operating in continental Europe, almost 30 per cent intended to expand there, while 17 per cent intended to reduce their presence.

But among those in emerging markets such as Africa and the so-called Bric countries, none expressed the intention to scale back operations.

Though four in 10 respondents thought UK economic conditions would get slightly worse, 45 per cent were intending to increase their British presence, with just 6 per cent intending to reduce it.

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