The evolving role of Chairs and Non-Executive Directors

Changing leadership competencies for a changing world

The presence, expertise and contribution of non-executive board members are all critical to the success of any business. Yet there is surprisingly little debate over how their role has changed in recent years, what impact recent disruptions have had, and how people considering embarking on a non-executive career can best prepare themselves for long-term success.

 

We sat down for detailed one-to-one interviews with five Chairs and Non-Executive Directors (NEDs), whose collective experience covers a broad spectrum of sectors, roles and lengths of tenure. In each interview, we’ve explored their views of the many aspects of non-executive board roles, focusing on how these roles are evolving and what these changes mean for the people taking them on.

Let us start with some context: The role of the board set out in the UK Corporate Governance Code highlights responsibilities such as providing entrepreneurial leadership, setting strategy, and ensuring appropriate human and financial resources are available to the business. Within this, the Chair leads the board’s discussions and agenda, ensures it operates as an effective working group, and promotes a culture of openness and debate. Meanwhile, the role of NEDs as defined in the Code includes providing constructive challenge, helping to develop the strategy, and scrutinising management’s performance in meeting agreed goals.  

It is no surprise that the role of the board has evolved over time.

Our five interviewees:

Charles Allen, Lord Allen of Kensington, CBE

Group Chair, Balfour Beatty plc

Chair, Global Media & Entertainment Ltd

Chair, THG plc

 

Sir John Armitt, CBE

Chair, The National Infrastructure Commission

 

Charles Gurassa

Chair, Guardian Media Group plc

Chair, Great Rail Journeys Ltd

Chair of the Board of Trustees, Oxfam

 

Doctor Ros Rivaz

Chair, Anglian Water Group Ltd

SID, Victrex Plc

SID, Computacenter plc

 

Nick Salmon

Chair, Scotia Gas Networks Ltd

Chair, Pressure Technologies plc

 

In recent years, companies have been required to respond to disruptions ranging from the pandemic to the war in Ukraine to increased inflation – while also navigating rapid advances in technology, as well as profound changes in societal expectations and regulatory requirements in areas like board diversity and reporting on ESG, performance and impacts.

What are some of the biggest changes that Chairs and NEDs themselves are seeing? Which skills and qualities do they think are now required? And what do people need to think about when embarking on a non-executive career, in order to get ahead of the changes and future-proof their portfolio roles?

To learn more about this progression and address these questions, we share the perspectives of these five eminent non-executives.

  

What has changed? Greater breadth and agility

Based on our deep expertise in this area, and echoed across all of our conversations, it is clear that the old days are over.

“Gone are the days when some NEDs reported the expectation was that they simply read the papers (probably), had a lunch and left. The expectations are higher, more availability is required, and it’s no longer a matter of “pounds per hour.”– Dr Ros Rivaz

Chairs are required to devote greater time to scrutinising longer and more detailed board documents with key information on risks often buried towards the back of the document. They also need to interact (and stay connected) with a wider range of board sub-committees focused on key business risks, including sustainability, net zero and digital transformation.

The expectations from CEOs regarding their interactions with boards have developed noticeably. There is now a greater emphasis on collaboration and engagement between the Executive Committee (ExCo) and the board. However, this change is not driven by corporate or legislative motives but rather a desire to better leverage their support – for example – being invited into a pitch meeting as an observer, to provide advice and support as appropriate.

“What has changed is the dynamism and the pace. In the past, you could forecast more easily as the rate of change was slower. And with the consumer changing their minds by the minute, you need eyes and ears everywhere. I want NEDs on my boards who are inquisitive and want to challenge.” – Charles Allen

This transformation requires non-executives to combine greater breadth with more agility. “The Chair and the board need a cohesive way to include wider issues, such as the ESG agenda, which is getting broader and broader,” explains John Armitt. “These wider issues will affect shareholders’ views. And for the customers, it’s all about perception. For Chairs, taking this into account is important when recruiting NEDs.”

“It’s important to stay focused on real issues – strategy, people, delivery – as these days there’s a greater emphasis than before on reporting. Layers get added to Annual Reporting requirements and reports are becoming ever more complex but not necessarily more informative.” – Nick Salmon

Today’s non-executives must also now navigate a more onerous compliance and reporting regime, while keeping on top of business fundamentals.

Another adjustment shaping non-executive careers is the wider age range. On average, people are retiring later and working longer. This is partly down to demographics – people live longer than they used to – and partly down to changing attitudes and expectations. A non-executive’s career can now continue well into their 70s, provided they can bring with them the right energy, experience and skillsets.

“Today, 70 is the new 60. Individuals in their late 60’s still have six to nine more years to contribute and pursue their portfolio career.” – Dr Ros Rivaz

On the other hand, people are beginning their non-executive careers earlier than in the past. Just a decade ago, it was rare for companies to consider a 45-year-old candidate as Chair. Today, with shifts in diversity dynamics and the significance of digital expertise, there is a widespread recognition of the advantages of younger representation on boards. Dr Roz Rivaz continues: “At the same time, there’s a need for younger people on boards to provide greater expertise in areas like digital. There are plenty of subjects that my generation doesn’t know a lot about, meaning we need individuals who bring different skills and knowledge.”

Skills and capabilities in a disrupted world

“Many of the core skills are the same as in the past – a significant evolution rather than a revolution. The changes are mainly around the ‘twin peaks’: greater aspects of diversity and technology. Today, there’s a greater diversity of age, gender and experience expected around a board table.” – Charles Gurassa

The impact of the pandemic has required that non-executives must now be much more resourceful and more agile in their decision-making than in the past. They must be equipped and willing to act rapidly in circumstances where the facts are often far from clear-cut.

As Charles Allen explains: “We’re facing a whole series of macroeconomic issues. There’s now more of a need for companies to focus on and understand both the global and local agenda. The challenge is how to plan for things that you essentially can’t predict. Having a plan B is no longer sufficient; Boards now need to have plans C, D, and E ready to go. There’s always something that’s unknown, so Chairs and NEDs need to be better able to deal with ambiguity, and to make decisions with only partial data. Information travels extremely fast, so they need to make these decisions quickly.”

“The broader qualities you are looking for in an NED include not just knowledge of the sector but also of the broader environment.” – John Armitt

This demands resilience and a firm grasp of risks facing the business. Pervasive disruption, fast-changing developments and “always-on” digital media mean constant scrutiny is a new fact of corporate life. “The importance of speed means you need the ability to have an opinion based on just 60% of the risk data,” says Dr Ros Rivaz. “Listening and contributing are important. As Chair, when you set your board up you need to make the skillset broader. And you must feel good in your own skin, no matter what you see written about yourself in the press.”

Following the pandemic, more companies have been seeking out board members with a solid track-record of experience and skills honed at publicly listed companies, with the proportion of first-time NED appointments slipping back. In an increasingly unpredictable operating environment, people with tried-and-tested skills are in demand. Yet this focus on business experience may be partly offset by the need to have people on boards with a good understanding of digital technologies.

Diversity and inclusion: an unstoppable force

The move towards having a more diverse membership on boards is one of the most significant developments in recent years, as best practice and stakeholder pressure compel all businesses to seek greater diversity.

At the same time, the definitions of diversity are being redrawn. Ten years ago, “board diversity” typically meant including a woman. Today, it is far broader, encompassing attributes like ethnicity, social diversity, sexual diversity and neurodiversity. This broader perspective on diversity presents both opportunities and challenges in board appointments.

“Diversity of thinking is highly important. One of the key roles of the Chair is to build a diverse team. Champion a sense of diversity – don’t get clones.” – Charles Allen

As we strive for greater inclusivity, the challenge of sustaining that diversity becomes more pronounced. For instance, when a female NED steps down, the decision to replace her with a male candidate might be met with reservations from other female NEDs. This underscores the importance of thoughtful and inclusive leadership decisions. Maintaining ethnic diversity is also challenging, particularly given the limited perspectives often associated with traditional Anglo-Saxon views on ethnicity. Embracing a broader, more inclusive understanding of ethnic diversity is crucial for the continued progress and effectiveness of our boards.

The Parker Review, with its aim of appointing at least one minority ethnic director by the end of 2021 for the FTSE 100 and the end of 2024 for the FTSE 250, has made substantial progress. As of the end of 2022, an impressive 96 percent of FTSE 100 companies and 67 percent of FTSE 250 companies had achieved this target. This progress reflects a broader push for diversity in boardrooms, encompassing not only ethnicity but also various other dimensions of diversity, as we shall explore further.

“It’s now accepted and acknowledged that companies are better served by diverse boards. There is a whole spectrum of different lenses that inclusion covers. Careful consideration of the different alternatives is necessary to achieve the optimum balance for a Board.” – Charles Gurassa

On a very positive note, diversity has also expanded the available talent pool, adds Dr Ros Rivaz; “With Chairs and NEDs now contributing in different ways, the cohort of potential candidates is much broader,” she says. “There’s more focus on demographic diversity, with dimensions expanding to family, education, religion and geographic origin. The key is that you’re able to bring your whole self to work. It’s about demonstrating the value of difference. I think greater gender diversity on boards has helped with the skill of listening, engaging and contributing to a debate – women tend to be strong in that regard.”

Very much connected to the diversity agenda is the emergence of reverse mentoring and “Shadow boards”, with more organisations introducing initiatives like junior boards and youth commissions populated with younger talent. The idea is the same: to gain a deeper understanding of how younger people perceive certain issues – including how best to drive greater diversity into company boards.

 

The evolving Chair/CEO relationship

Trust and transparency between the Chair and CEO are crucial for adding value to the organisation. Part of the Chair’s role is about bringing everyone together, including the CEO who may sometimes feel under pressure in what can be quite an isolated role. It can happen that, when feeling anxious about the Chair or the Board’s view or expected response, the CEO may take issues away to deal with on their own, without the benefit of the Board’s experience and expertise. Dr Ros Rivaz shares, “If a CEO or CFO comes with a problem, listening and understanding to initially ensure that the problem is shared and understood is step one for me. The Chair has to make sure the CEO is not isolated, while also pulling together contributions from everybody else.”

“Clarity on who does what is highly important: the Chair runs the board; the Chief Executive runs the business. You need the right people in the right jobs. The worst Chairs are the ones who still want to be Chief Executives. The Chair needs to build confidence with the CEO – but also rattle around the business to REALLY understand what is going on.” – Charles Allen

Building on this, John Armitt stresses that the right Chair/CEO relationship is key to keeping the business on track and out of trouble. “The exec team needs to be transparent with the board, but also keep the board at arm’s length.”

“In the past, a NED who didn’t agree with the board’s collective decisions was often just excluded from the discussion. Now, as a Chair, you have to make sure the outsider is included. You may well get some critical insight. And the board member is less likely to provide insight next time if they were shut out this time around.” – Dr Ros Rivaz

Impacts of disruption – from digital to pandemic to war

As we have already highlighted, the macro disruptions of recent years have impacted the role and remit of Chairs and NEDs. According to Nick Salmon, the global financial crisis in 2008 was a key turning point. “The Global Financial Crisis interrupted years of complacency when people thought nothing could go wrong – which was a very dangerous mindset,” he explains.

“The pandemic was arguably less challenging since businesses were running more efficiently compared to 10 years before. From my experience, speed of decision-making is vital in a crisis. You need to avoid complacency and think hard and fast.” – Nick Salmon

More recently, a principal impact of the pandemic was to drive digital technology and transformation rapidly and permanently up the board agenda – where it has stayed ever since. “The pandemic clearly brought the less digitally aware board members quickly up to date,” says Charles Gurassa. “The days when people wanted to have 300 pages of board papers printed off beforehand and posted to their homes came to an abrupt end, and digital became an acceptable way of working.”

“Virtual meetings were faster-moving with more updates from the CEO. However, hybrid board meetings are the hardest to manage, as it’s not easy even to tell who is speaking at a long table. On the positive side, boards became more supportive of one another, and we could have more meetings with the execs because they were easier to arrange. The pandemic brought a greater focus on mental support, and virtual meetings helped us stay connected through such challenging times.” – John Armitt

Technology has moved to the heart of every business, and at an incredible speed. Every single company needs to have an AI agenda,” highlights Charles Allen. “Historically, digital sat on one side. Now it’s integral to everything you do, and there’s hardly any sector that’s unaffected. For Chairs, this raises questions like: how do you keep your board up to date? How do you apply new technologies to the greatest effect?”

But while technology is now core to businesses, the use of digital links for board meetings appears to have passed its peak, as the drawbacks of virtual meetings have become apparent. Nick Salmon explains, “Board meeting have now gone back to face-to-face. Without that physical engagement it’s difficult to relate to each other or maintain that corporate culture. The culture can sustain for a year or so through virtual connections, but it would be difficult to maintain it for longer.”

This is heightened by the greater focus on building and sustaining trust and transparency between Chair and the CEO. Aspects of the online model remain, particularly where companies are seeking to tap into talent based overseas. That’s a positive development that will persist into the future.

While all five Chairs agree that you can maintain effective relationships remotely, building those relationships online is not easy. Dr Ros Rivaz echoes this saying. “I recently came into the office to meet a new CIO and while I was there, other people came over and introduced themselves – this wouldn’t have happened if our meeting was via a virtual conference.”

Get ready for the future: Advice for aspiring NEDs and board Chairs

Regardless of whether you find yourself at the start of a portfolio career, seeking your initial validation, or if you’re already an experienced non-executive, gaining insight into the evolving nature of these positions and the sought-after attributes which will be essential in the coming five, ten, or fifteen years can prove invaluable. For those considering a transition into NED or Chair roles, here are some valuable pieces of advice from our board professionals:

“It’s more likely that we’re all going to experience a steady economic climate as opposed to growth in near future. Boards will need to make hard decisions whether to concentrate on the UK only, concentrate on the core business only and manage a more constrained growth path” – John Armitt

Understand the changing landscape: Charles Gurassa highlights three drivers of change in the Chair and NED environment. “The first is increasing regulatory scrutiny, where taking no action is not an option. The second is that organisations are rejecting the historic cohort and seeking more diverse boards, and third is a proactive push for diversity by Chairs themselves.” It is key to stay attuned to these shifts as they shape the future of these roles.

Adapt to the pace of change: Charles Allen emphasises that the pace of change in the business world won’t slow down. Adaptability is key. He says, “Models are changing, the consumer is changing, and the next two to three years will see an unprecedented amount of change. Listen to everybody’s views. Take sufficient time to reflect.”

Master media savviness: The speed of information is accelerating all the time. Previously companies would be focused on the next morning’s newspapers. Now, stories can and do break worldwide in real-time. In such a world, it’s much harder to contain the impact of misinformation once it’s out in the public sphere. Reputations that take years to build can be irreparably damaged in a few minutes. Stay informed and navigate the media landscape effectively.

Cultivate reflective skills: Nick Salmon stresses the importance of reflection. As relationships between Chairs and CEOs grow closer, the ability to contribute and, equally important, to listen, will grow in significance. “Focus on what truly matters, avoid distractions, and be a thoughtful, discerning leader.”

Build a personal brand: Be confident in your abilities and decisions. Charles Gurassa adds: “You have to look after your personal brand and apply careful due diligence.” Seek the right role at the right time to build experience in desired areas.

Embrace breadth of experience: While in the past, NEDs and Chairs often came from associated business sectors, today, breadth of experience across various industries is becoming an increasingly valued quality, with many non-executives working across a number of organisations in completely different industries. Be willing to work across a variety of organisations and sectors.

Engage and communicate effectively: John Armitt advises: “Be prepared to be more engaging and inquisitive. And pose more demanding questions to the executive group, otherwise you will be missing underlying issues. Today, dealing with the mass-media takes up a significant amount of a CEOs time. To reduce that burden, the Chair needs to be out there representing and explaining the business in a quiet way – casual, off the record conversations as opposed to on-the-record meetings.” Build relationships with the media, as rapid information dissemination demands proactive responses, and don’t refuse when they ask for off the record background.

 

The past few years have been interesting and challenging times for Chairs and NEDs – and they’ve mostly risen to the occasion. The next few years look set to raise the bar even further. For companies, the question is: do you think your board is fit for the future? And for individuals considering a portfolio career as a NED, it is: do you have what it takes?

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