Episode 1 - The leadership lion

SC: Good day Rachael, thank you very much for this opportunity. Today we are going to be talking about leadership. What I like to do in my themes of corporate governance is to discuss them in the context of an animal and by doing that it’s quite easy to visualise the position more clearly than it might be than if we were talking in human terms only. So, we’re going to be talking about leadership in the context of the lion and how lonely it is to be the leader of a pride of lions: you are the only one in that position and from there, the only place to go is down or out. So, we want to ensure that we can keep our leaders in position for the duration that they should be and to make them the most efficient possible.

SC: Probably the most successful way a company secretary can support a chair is to be like their chief of staff. In other words, every move that the chair needs to make relative to the company, the company secretary is right there thinking 10 steps ahead of the chair, giving information, giving insight, keeping them abreast of what is occurring in the company and actually being their eyes and ears into the business, bearing in mind that the chair is not in a position to be touching the business in the same way the CEO is. The company secretary can really give them insights as to what the business is doing, how people are feeling, what are the emotions, what are the risks that are arising, as they perceive it. And company secretaries tend to be extremely knowledgeable as to where the business is – and I use to word ‘at’ in inverted commas. They get to know the real feeling, litmus view of where the company’s at, at that moment in time.

SC: Being a leader in their own right as a company secretary is a good place to start the answer to this, because if they’re not empowered in their own role, they’re no use to the board at all. So, it’s most important that the company secretary is of a seniority that they are an equal peer to any of the directors and to the chair and that they are respected for their knowledge about the business and about corporate governance, the codes and often quite a lot of legal issues that they need to contend with, that they have the answer at their fingertips. The way that supports the whole board is through trust, respect, being the person that is the secretary, the holder of secrets. So, they can hold two sides to the argument and hear both sides and act as the confidante to both sides of those arguments and helping the individuals to find a commonality and a way forward. So, it’s really important for them to, first of all, own their own shoes and second of all to be that trustworthy individual at a peer-to-peer level with every director including the chair of the board.

SC: I see quite a vast range in behaviour responses from CEOs towards company secretaries. And the important one is that they respect the individual in question. But the importance is for the company secretary to build a relationship with the CEO person-to-person on a competency level therefore on a trust level. The value the company secretary can then bring to the CEO is in supporting them to be able to deliver papers, content, subject matters, priorities, such that the board will respond in the most positive way for the business, bearing in mind the board is aligned to the business strategy in the same way that the CEO is. Best friend is your board, how to ensure they are your best friend, is the company secretary, is the route to success. So, ensuring that they work with the co sec to get that agenda and that board pack absolutely spot on.

SC: Co secs are in many ways, in my view, chairs in sheep’s clothing. They are quite capable of being the most competent chairs around themselves. So, therefore the ability to guide the exec in the strategic planning process is a very valuable contribution that a co sec can bring. Because they’re not seen as a threat by the individuals: head of marketing, head of legal, head of risk, head of buss dev. And therefore, they can build a very good, symbiotic relationship where the co sec can support them to position what their part of the buss can do that will drive a strategic outcome that the board is given as a guidance to the exec. So they’re very, very, powerful in uplifting the exec’s blue skies thinking towards the strategic objectives that the board and the non-exec have given as a guideline in the strategic planning process.

SC: It’s a bit difficult challenging your boss, as we all know. And a company secretary has this double dotted line, one to the CEO and one to the chair. You know, it’s interesting the tougher as an individual that the chair might be the stronger the co sec needs to stand their ground, they have to be knowledgeable, senior, respectful, capable, and know their facts and it’s important to stand your ground as a co sec if that is what is right for the buss. So, to challenge the chair is not a negative, it is actually a very, very strong positive. Co secs have the ability to communicate, they have empathy, they have the ability to listen, to influence and it’s all those traits that need to come to the fore in that, in inverted commas, ‘challenge’ of the chair, you can challenge the chair without it being a red-rag challenge, it can be through influence, through discussion, through debate, through getting the individual to see the point for themselves and that is the way that you invariably get buy-in far more successfully and I have seen co secs cope with that in an extremely competent manner.

SC: There are a couple of occasions when the chair might need to leave the buss and the co sec can have some very positive impacts in what could be a very sticky, awkward situation. If we look at it at 9 years, the co sec should be setting the expectation to everybody 3 years prior to that 9 years, so from 6 years on or earlier if the co works on a 6 year strategy is to start that very clearly in the succession plan so that there are no surprises, it’s not seen as personal. It’s not seen as vindictive. What you’re looking for is in my view if the chair is still the chair of the nom com, that is your first step of change. If you’re foreseeing complications coming, make a change for potentially the SID to take over the nom com, because that opens the way to independent thinking. Use the co sec in the messaging process of good gov, the code, what is the expectation refreshing the board. There are a lot of content in our code which talks about the independence requirements, independence of mind and ensuring that you’ve got the entrepreneurial leadership and long-term sustainability focus, there are lots of things that can be used to support that change for refreshing the board. If you’ve got a board that’s got a lot of people that have been there a while, it might be that you discuss with the chair that theirs is the first to go because he is the most senior, she is the most senior, that they should be doing the right thing first so there’s a way to influence that decision, no-one’s going to like it, everyone wants to keep the job for life, but we all have to understand that that narrative of ongoing succession needs to start really early inside the nom com. So, my recommendation is, right now, for all co secs you should be changing your nomination chair not to be the board chair. Because that whole project of refreshing the board goes downhill under these circumstances because the chair has got so many other things that they should be focused on rather than the mundane process of succession planning, which is so critical.

SC: Oh, that’s an interesting question when you’re interviewing for a new chair or comparing different candidates for a new chair role. I would say your first absolute critical requirement is somebody who has deep empathy, deep EQ, deep coaching, and mentoring qualities, they need to be able to chair a meeting. After that, behind all those requirements I would look for industry knowledge I would look for education, I would look for experience, I would look for their network, then look at what the buss looks for next. If you don’t have those first very key personal qualities, the chair is not going to succeed in that business. One of the things I’d also be aware of rather than the positives I’ve just mentioned now is deep industry expert, because then they’re going to start telling the CEO what to do. And we know that any CEO that’s been told what do – you may as well cut their wings off, they will leave. That is the worst person to put in as a chair but the best person to have, potentially, is a senior independent director where you can challenge, but you can’t do that in the chair role because you need the mentoring, coaching, devil’s advocate, yes, outside of the meeting but inside the meeting, they are chairing the meeting and industry experts don’t do that well when they’re not seeing it done the way they would’ve done it when they’d been sitting in the CEO’s role.

SC: I really do. I think it’s really important that chairs have the modern agenda front of mind, and I use the word modern agenda in a very broad perspective of the E of ESG, which is your climate change, looking after our planet and our people before we look after profit but having the entrepreneurial aspect that you’re looking still at sustainability of all the elements of the business. Social in terms of people, caring about the people, the community, the customer, the supply chain and then looking at the G, of having a chair that is not governance respectful is an impossible job for a company secretary to take on, so they really need to have the strength in E, S and G. They need to have experience at board level, but they could do it in a completely different industry. Sometimes it’s really valuable to bring the structure of the financial services sector to something that is far less structured as an industry bringing regulatory or risk dynamics to a buss that is now going into a more risk environment but is not natural to consider risk in that industry so typically the broad spectrum is good, one of the things one’s got to be careful of is whether they’ve come up through a profession and no disrespect to the professionals, because we absolutely need them, but you’ve got to be careful of someone who’s an architect or who is an engineer or who is a finance director or a legal expert because unless they are trained outside of their profession in many, many years of their career, those kind of people, typically if they’ve come straight from the professional role, typically don’t make very good chairs because they’re used to being in instruction mode rather than in buss mode.

SC: I think we come back to getting a chair to understand diversity as being a story that the co sec is constantly sharing with the chair, evidencing the value. I’ve just done some research for another project of how many females make it to chair roles in senior companies and the statistics are horrific. The only way we are going to get that diversity following into the exec line and into the chair line because we’re doing reasonably ok in the non-execs because we’ve focussed on it, is we need to focus on it, so we need to set goals, if we set goals we can measure them, if we measure them, we get delivery. So, it’s important for the buss to set its relative goals, you don’t want to set a diversity goal that’s going to create chaos. So, the diversity has to be relevant to the marketplace, to the customer, to the product, to the demographics of who they are serving but you need to bring in not a prescriptive male, colour, religion, what you’re looking for is diversity of thought. Diversity of thought is so critical because that is what can bring better decision making. You also need a very strong chair to be able to chair a meeting with diversity of thought occurring so that you get the best out of it and not the loudest noise. You get the better decision making the summary of the good quality thoughts being brought together by the chair. So, the more diverse the more difficult it is to chair but the ultimate decision, has been well thought through and everybody feels bought into the outcome and the decision that has been set. So, the co sec can support all the directors and the chair in the nominations process, so being part of the nominations committee. Start right from the grass roots of ensuring that the specs for the roles being filled are written out right in the first place. Also knowing what diversity you want and why you want it and what you’re going to do with it and if you can’t answer those questions, don’t take diversity for the sake of it because it will look like bedlam. So, it’s important to do it right by every buss which is unique but that is where the co sec’s ability to understand the buss and the entire demographics that value will be brought into the nom com right from the beginning and to keep the chair very well informed of the why and the value.

SC: Interesting question when you’ve got a chair that doesn’t chair well but equally is not open to some mentoring or coaching themselves to be a better chair. The problem you have with a lot of chairs is they’ve got to the top of their career within that business the only place they can go upwards is a better chair role with a bigger org with more kudos. So, their next point in that bus is on the way out and of course therefore there’s a lot of self-protection of their position at that moment in time, which is totally human, totally respected and totally understood, nothing wrong with it, but it needs to be done in the best interests of the CO at all times. So sometimes a board evaluation for example, is one way of doing it, another one is board development sessions where the co sec’s briefed the person who is running the sessions very carefully. Another way is to run a case study that is completely different to the CO but the issues are embedded within the story and therefore can be teased out and discussed and debated in detail and then the mirror turned round and said this is how you look. So, in all cases you need that ah-ha factor to land but it needs to be done in a non-threatening collaborative way where the team are working together.

SC: Difficult to get chairs to understand risk, which is so counter to why we have nominations, why we have rem and why we have audit. It’s really important for them to understand what is the value those existing, standard, totally acceptable three committees do. And very often we’ll see an investment committee, we’ll see a conduct or a governance type committees and boards find those acceptable. But when it comes to risk, there’s often the response that the risk belongs to the board, everything belongs to the board whether it’s audit, whether it’s the financial statements, or whether it is assessing risk. The board cannot get into the detail that it needs to and therefore a risk committee is extremely valuable. Not necessarily chaired by the same person as audit who looks backwards, risk looks forward, sometimes one person can’t do both as well as each other and therefore often better to be held under a different individual and this focus on risk by a committee and by someone who’s experienced in risk management can actually help the board to really up their game in terms of risk management which brings the chair along with the journey of increasing the risk radar of the buss on the external environment the internal environment being able to brainstorm possible things not just review the risk register. The risk register should be very dynamic, and the board should be looking at risk without looking at a risk register to see what changed place in the last 6 months. You should be thinking what in our business has changed place and is the risk register reflecting that? so they should be starting with a white piece of paper which is where a risk committee can bring value such that the whole board including the chair can challenge the chair of the risk committee on the issues that they are deep diving or concerned about or the changes that are happening in the environment. So, it changes the dynamic of the board to be able to focus on that topic in a way that the long term sustainability of the buss, the modern agenda, the changes in our environment are constantly being considered.

SC: Like over lunch or something like that. (RJ, Yes). So, my first question is, do you have the right people to have the right conversations so that you can discuss things properly. In other words, how often do you see a multitude of executive people attending board meetings for the entire board meeting? That will completely curtail the right kind of conversations being had and creating a safe place. So first of all is to clean up who’s present, when they’re present, for how long they are present in the board meeting. The second aspect is to train those trying to do it into the risks that this is creating, and the other aspect is to ensure that a full due process occurs when you notice this kind of thing is potentially happening in the background. So, you actually almost make it embarrassing for them to continue that kind of behaviour because of the nature of the embarrassment that you keep having to say you can’t have done that, now we’re going to have to ratify it, what was it you discussed. Very quickly they’ll have the conversation they’ll say ok, let’s bring it to board, let’s make sure it’s on the agenda, it’s high priority, let’s discuss it properly with the rest of the board. We’ve achieved our objective, so you can quite subtly as a co sec actually get them to toe the line naturally because they realise that is the right thing to do.

SC: Oh that’s an interesting one, how to induct a chair. You obviously want them to spend time with the CEO to get to understand the buss from their perspective. I would though suggest that the chair first spends a period of time with the co sec getting the download. You’d be amazed when you look at the end result and that first conversation, yes you learn a lot in between, but relatively speaking you get 80% of the info right at the beginning because the cos sec will tell it as it is because they do good governance and they want the buss to succeed so they will always ensure that the right things are highlighted. Equally important is to build a relationship with the CEO, that is non-threatening. Mentoring, supporting but challenging, that constructive conflict challenge environment that is supporting the CEO to be the best possible person they can be rather than knocking them down. And actually being a real friend in terms of that discussion, which is always held offline. I then think the chair should spend good quality time with the CFO understanding the numbers you’ll get the facts, you’ll get the cash flow, you’ll get the sustainability from a financial perspective of the buss. A very critical aspect to understand and also to get a feel for the value that the finance person can bring to the buss rather than the recording of the buss, and determining whether you have got a CFO who will stand in their own shoes against the CEO: one person’s driving the delivery of the buss, the other one’s driving the recording and the legal and the compliance aspect of the buss. And how do those two work in tandem such that they bring independent voice to the board. And then obvs it’s looking into the rest of the buss, everything from the product, to the customer, to the location, to the geographies and getting to understand and walk the floor of the business, which is really critical. Preferably unchaperoned so that they can go and actually talk. Not make decisions, just listen, just ask questions. People will then respect and know who the chair is because they’ve met the individual. You’d be amazed how much you learn walking the floor of a buss and what that value is you can bring back to the conversation in the boardroom.

SC: thank you very much Rachael, I appreciate your time.