NED’ucation

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Recently I have had a couple of conversations which have made me reflect on the general make up of boards within Financial Services. These followed on from updating myself on the progress of the FTSE 100 firms which were, at March this year, less than 2% away from achieving the 25% target set by the Davies report after the crash. I should say at this point, that I don’t agree with arbitrary quotas, it’s about finding the right people to lead and guide our firms.

The first conversation was with a very capable, highly qualified lady that I know from a professional women’s networking group. She is hoping to move away from fulltime employment in the next few years and is beginning the process of finding herself a NED position within Financial Services. She has and continues to fund the necessary skills development herself, outside of work.

Make no mistake, it is tough to recruit people on this basis if the pool of willing NEDs is being depleted because the regulatory expectation placed upon NEDs is so high.

The second was with an Executive Chair who had a number of questions about the independence of NEDs, how it could be achieved and how as Chair, he should give oversight to that independence.

Let us just consider the good practice and regulatory expectation for independence;

  • not an employee in the last 5 years
  • no material business interest with the company in the last 3 years
  • no other remuneration received apart from director salary (includes options and pension)
  • no close family ties
  • not a significant shareholder
  • not in the position for more than 9 years since date of first election

Make no mistake, it is tough to recruit people on this basis if the pool of willing NEDs is being depleted because the regulatory expectation placed upon NEDs is so high. They are expected, essentially on a part time basis, to provide sufficient oversight of the Executive and ensure compliance. The starting salary for NEDs is rising on this basis and many are again reviewing their positions in the light of the new Senior Managers Regime in banking, where individual liability and burden of proof is being heightened.

Although there are a number of briefings and materials available for Senior Executives and NEDs, there are very few programmes concentrating on the skills development for these individuals. From my knowledge, very few organisations have developed in house programmes focusing on this aspect. Why can’t financial service firms see that by investing in the up and coming executives not only do we create more rounded and mature future leaders but also add to the pool of Senior Executives who are out there ready and able to take on the next challenge i.e. independent NED.
We all have a tendency to recruit in our own image, but if we thought more about investing in people skills by establishing more “Executive Academies” thus developing our future leaders, surely it would be easier to meet targets, recommendations and best practice for the good of all firms and ultimately clients.

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Through our award winning training and consultancy partnership FSTP LLP we hope to become a trusted provider of services to client firms across Financial Services. Specialties: Training and consultancy, project and interim management from regulatory issues through to management development and board services. Chartered Member of the Chartered Institute of Securities & Investment

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