Fidelio Table Talk – Unlocking Value: Board Evaluations & Diversity

Fidelio was delighted to speak recently in Copenhagen on the topic of Board Evaluations and Board Dynamic at the Danish Professional Directors Association Conference. The theme is topical given the government-sponsored review being conducted by ICSA in the UK of how Board Evaluation is delivered; in the Danish market there was clear interest in what value an Evaluation adds, how is it best conducted, and by whom.

We were joined on the panel by a leading international investor who has previously joined Fidelio Board breakfasts, as well as Chairs and practitioners. A consistent theme developed. While compliance and regulation is of course important, Boards benefit substantially from an Evaluation that is able to identify the few key areas that are challenging the Board. Addressing these issues increases the Board’s effectiveness and unlocks value.

This sits very comfortably with Fidelio’s approach and one of the challenges frequently identified in an Evaluation relates to achieving greater diversity at Board and Executive level. Cognitive diversity is an attribute of an effective Board and gender diversity is an important contributor.

Scandinavia has long been considered a trailblazer in promoting gender diversity and formal quotas. Norway, for example, obliged listed companies to reserve 40% of Director seats for women in 2008, with strict sanctions. Denmark, however, is not at the forefront and in spite of a strong interest in corporate governance, performance on gender diversity remains somewhat lacklustre. A recent survey for the Danish Gender Diversity Roundtable puts Denmark very much in the middle of the pack rather than at the forefront.

Nor is Denmark alone. Hermes EOS, the investor advisor, has given German companies a “final warning” on gender diversity and is promising to vote against any Supervisory Boards that fall short of its guidelines. Despite legislation – the so-called Frauenquote – for Supervisory Boards, Germany’s performance remains poor at the operational level.

“With regard to diversity on the management board and below, Germany is still lagging very much behind internationally” – Hans-Christoph Hirt, Head of Hermes EOS
This is a theme Fidelio last picked up at our Frankfurt seminar in October 2018and will revisit in Stuttgart in October 2019 with practical recommendations of how German and UK companies can close the gender gap.

In the UK, we await the next round of reporting by the Hampton-Alexander Review. A goal is in place to achieve 33% female representation in senior leadership positions across the FTSE 350 by 2020, yet many companies have a way to go. And Fidelio has flagged recently that the critical Chair and CEO roles have very low female representation, with just 5 female Chairs in the FTSE100.  Recent events and media coverage also suggest that leading professional services firms too face challenges in enhancing diversityMuch needs to be done.

Against this backdrop it unsurprising that Board Evaluations frequently flag the roll out of diversity as a Board challenge – but importantly a challenge which, if addressed, unlocks substantial value. This is the prize for maintaining momentum.

Chairs should rightly expect from a Board Evaluation:

  1. Open questions that allow observations and concerns to come to the surface, including on the important issue of diversity
  2. An insight into how other leading Boards tackle similar issues
  3. Practical recommendations that will drive progress in diversity

And Fidelio will certainly maintain our focus. 50% of our Searches result in female placements and in September 2019 we will host the seventh iteration of Fidelio’s “A Seat at the Table”. We will be joined by senior female participants internationally and our contributors include three female Chairs.

To learn more about how Fidelio can support your Board in unlocking value – through Evaluation, Development and Search – please contact Gillian Karran-Cumberlege.

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