Pressure is building to improve the gender balance of Chairs at the top of our leading companies and organisations. This is an objective of the UK’s government-sponsored Hampton-Alexander Review, as well as the 30% Club and many similar initiatives internationally.
Fidelio has been a vocal champion for (i) a better understanding of the Chair role and (ii) a stronger pipeline, including through our Chair Masterclass and “A Seat at the Table” programmes.
Although there has been progress towards diversity at the Non-Executive director level, the number of women in the Chair role remains stubbornly low. And while opening up the pipeline for the Chair role has been a focus – for example, overcoming the too often unchallenged requirement for previous FTSE100 Chair experience – there has been less questioning of the role itself and how it is changing.
Both our Search and Evaluation assignments have identified a considerable increase in the complexity of the Chair role. Much of this is linked to corporate purpose and a shift from a narrow definition of shareholder value to stakeholder value, giving rise to ESG investing.
Fidelio is confident that an honest debate about the role specification for the Chair will in and of itself attract a broader range of highly suitable and talented candidates.
Expanding the Chair Brief
The role of the Chair has developed significantly since the Financial Crisis as scrutiny has intensified from shareholders and stakeholders. Bank bailouts during the crisis and high-profile corporate failures in the following decade have eroded public trust in companies and created an expectation of greater Chair accountability.
In addition, there has been a broader trend towards a stakeholder insistence on corporate purpose and emphasis on the public and environmental good. This is even the case in markets such as the US where governance has traditionally focused on shareholder primacy.
For companies accessing the capital markets, the Chair role is being shaped by the ESG filter that investors are increasingly applying, with sustainable investing assets globally increasing by 35% to $30.7 trillion from 2016-18.
This is also reflected in the most recent 2018 Corporate Governance Code in the UK which is explicit in setting out he Chair’s responsibility for “listening to the views of shareholders, the workforce, customers and other key stakeholders,” as well the Board’s accountability for culture and setting the tone from the top.
The implications of the rise of ESG and the impact on the role of the Chair were also topics for a recent Fidelio Chair Breakfast ‘ESG – Expectations for the Chair’.
ESG & The Chair
That stakeholder and ESG pressure on Chairs is increasing is evident. Consider two current examples:
- Climate change risk is rapidly rising up the Board Agenda, and the recent UK Court of Appeal landmark decision against Heathrow Airport and its bid for a third runway means that all Chairs of major infrastructure projects in the UK now need to take close attention of “Government policy relating to the mitigation of, and adaptation to, climate change”. Arguably this ruling is the first step globally in providing a legal underpinning for the Paris Accord.
- The rapid spread of coronavirus is prompting one corporate after another to adjust their respective outlook statements. In an extraordinarily rapidly developing situation, Chairs need to ensure that the executive navigates a course of action that takes account of employees, the public and shareholders. Governments are struggling; there’s no easy template for the Chair to follow.
Against this backdrop Chairs increasingly need to bring the following attributes to the table:
- A robust moral compass as well as a firm grasp of what sustainable growth looks like for the organisation.
- Keen antennae and an ability to interpret weak signals. The risks faced by companies have multiplied, and Chairs need to ensure the Board is providing effective and discerning horizon-scanning.
- Strong engagement and communication skills. It is no longer enough for the Board to simply delegate this to the Executive: the Chair also needs sure-footed communication skills in order to guide the organisation, challenge the Executive, and – when appropriate – to engage effectively with shareholders and stakeholders.
- The ability to build trust within the Board, the company and externally.
Broader Role; Broader Pipeline
The challenges facing today’s Chairs define the role and the attributes that a Chair needs to bring to the table. This breadth of experience looks very different from that required by FTSE or DAX Chairs a decade, or even five years ago.
One key attribute that Chairs of leading organisations require is a strong capability in stakeholder engagement. This may more readily be found in a senior executive with functional as well as operational experience. Is it necessary to have been a sitting FTSE or DAX CEO? Possibly not. But CEOs of major private companies or non-profit organisations may also be relevant candidates including for corporate Chair roles.
The redefining of the Chair role has the potential to unlock a much broader, more diverse and extremely able pipeline of talented candidates.
Fidelio is pleased to make an important contribution towards transforming the understanding of the role of the Chair, as well as supporting our clients in the appointment of Chairs who are well equipped to add substantial, sustainable value for the organisation.
For further information about how Fidelio supports Boards and Chair succession planning through Search and Evaluation, please contact Gillian Karran-Cumberlege on firstname.lastname@example.org.