1. The Journey to the Board and Board
Effectiveness
Warwick Business School – London Alumni Event,
18th October 2011
Louise Redmond, Director Law Debenture
Governance Services

2. The Destination
• Chairman of the Board?
• Running your own company?
• CEO of a major company?
• A plural career?
• An adviser to boards?
• Trustee on a charity board?
• A pension fund director?

3. Getting onto a Board
• Being clear on the destination
• Find out about what success looks like
• Start early with some good career choices
• Be clever with your tactics
There are other ways to be fulfilled.

4. Enterprise in the UK
• 4.8m enterprises in the UK
– 97% employ up to 50 people
– 2.5% employ 50 – 250 people
– 0.5% employ over 250 people
Most enterprises are “sole traders” or limited
companies with one director
Data from the Office for National Statistics

5. Companies Main Market Companies
1600 £2.50
• Data from the London Stock 1400
1200
£2.00
Market Capitalisation £tn
Number of
Number of companies
Exchange (LSE) reveals 1000 £1.50
Companies
800
listing trends 600 £1.00
Market
Capitalisation
£tn
400
• New member admissions to 200
£0.50
AIM were highest in 2005 0
2003 2005
Year
2007 2011
£0.00
(519)
• New member admissions to AIM Liste d Companie s
AIM dropped to only 102 in 1800
1600
2010 1400
Current
Num ber of com panies
1200 Companies
• The LSE Main Market has 1000
800
New
Admissions
dropped from 1416 600
400
companies in 2003 to 997 in 200
0
2011. 2005 2007
Year
2010
• Are they listing elsewhere?

6. What Board?
• Public listed company
• Private limited company
• Operating company
• Charity
• Public sector eg NHS, NDPB
• Education
• Pension fund

7. How have Boards changed?
• Think Maxwell, Enron, the banks
• From the great and the good to the qualified and
the committed?
• Shareholder rights and activist investors are
more interventionist
• Regulators vet candidates (such as the Financial
Services Authority)
• Boards are reviewed regularly

8. Why Boards have Changed
• Capitalism: You have two cows. You sell one
and buy a bull. Your herd multiplies, and the
economy grows. You sell them and retire on the
income.

9. Why Boards have Changed
ENRON Capitalism: You have two cows. You sell three of them
to your publicly listed company, using letters of credit opened
by your brother-in-law at the bank, then execute a debt/equity
swap with an associated general offer so that you get all four
cows back, with a tax exemption for five cows. The milk rights
of the six cows are transferred via an intermediary to a
Cayman Island company secretly owned by the majority
shareholder who sells the rights to all seven cows back to your
listed company. The annual report says the company owns
eight cows, with an option on one more. You sell one cow to
buy a new president of the United States, leaving you with nine
cows. You provide no balance sheet with the release. The
public buys your bull.

10. What makes a Board Effective?
• A clear constitution and remit from the owners (e.g. the
major shareholders)
• A good mix of directors, all of whom add value
• Rigorous decision making processes particularly on the
use of capital
• Executives held to account
• Good relationships with the owners and others with
outside interests
• Strong strategic directions
• Ability to deal with the unexpected

11. title

12. Key
Principles
• Look to the future
• Build on strengths
• Address weaknesses

13. So, you really want to be a Director?
Statutory Duties 2006 Companies Act (Sections 171-182)
• Act within their powers
• Promote the success of the company
• Exercise independent judgement
• Exercise reasonable care, skill and diligence
• Avoid conflicts of interest
• Not to accept benefits from third parties
• Declare an interest in a proposed transaction or
arrangement
• Declare an interest in an existing transaction or
arrangement

14. Risks for the Board Director
• If a non-executive director, how can you
effectively challenge the executives?
• How can you evaluate difficulties ahead?
• How can you balance the Opportunity and the
Risk?
• How can you assess appropriate rewards?
• Could your reputation be affected?

15. What Role?
• All directors have the same duties in law –
whether executive or non-executive
• If you have a specific role there will be greater
expectations of the qualifications you have for
that job eg the finance director
• Boards are getting smaller so fewer executives
are on the board

16. How to Choose a New Director
• What makes this company successful
at this point in time?
• What will make this board even more
effective?
• What is wanted in a new director?
• Who fits the bill?

17. Enhance the Reputation
“Lose money for the firm and I will be
understanding. Lose a shred of
reputation for the firm and I will be
ruthless.”
Warren Buffett, 1990

18. What it will be like on the Board?
“If we are all in agreement on the decision - then I
propose we postpone further discussion of this
matter until our next meeting to give ourselves
time to develop disagreement and perhaps gain
some understanding of what the decision is all
about.”
Alfred P Sloan 1875 - 1966

19. Effective Directors – Inputs and Outputs
You put in: The company gets out:
• Your own capability in • Impact on strategy and
action on culture. And in some
• Your clarity on role and cases on execution?
duties • Risk + Crisis +
• Your decision-making Opportunity = Agility
contribution • Reputation and funding
• Your coaching to improve through Connectedness
executive capability great networks

20. The Journey
• Start early
• Set a goal
• Network from Day 1
• Pick the right roles along the way
• Ask for help
• Help others
• Tell people about yourself
• Assume nothing

21. Career Management – what Role?
“Just because people watch out for #1 doesn’t
mean they manage their careers intelligently”
John Kotter

22. Career Stages
1. Dependency
2. Independency
3. Through Others
4. Across businesses
5. Transforming industries
The contract, the contribution, the outlook and the
outcomes change at each stage

23. Characteristics of a Developmental Role
1. Success or failure will be obvious and measurable
2. Assertive, take charge leadership is required
3. Must deal with new situations and people
4. Creates increased personal pressure
5. Requires the ability to influence without authority
6. Tasks are ambiguous – no easy answers
7. High visibility
8. Involves a fix-it/greenfield/turn-around situation
9. Breaks new ground
10. Interaction with significant senior leaders
11. Something important is missing
Centre for Creative Leadership

24. Getting on the Board – Best Tactics
• Become an executive director
• Become a board adviser, with breadth
• Select roles which are valued on the board –
P&L responsibility is the best, next finance
• Understand key markets – get international
experience (and a lot of it) as early as possible
• Take risks and learn

25. Why do some do less well than others?
• Poor choice of profession and job roles
• Personal interest comes above relevant experience
• No line experience
• Less prepared to travel or live abroard
• Avoid the tough roles eg long hours, high visibility
• Accept second choices e.g. the COO role
• Not prepared to start again
• Too deferential

26. Some interesting findings
“The team’s research found that women were four
times more likely than men to be self-
deprecating, use humour and speak indirectly or
apologetically when broaching difficult subjects
with board members in order to avoid conflict.
And it doesn't always work.”
The Guardian on Judith Baxter’s research, 27 July 2011
Dr Judith Baxter, Lecturer in Applied Linguistics, Aston University

27. A key ingredient for a board director?
“When you find everyone agreeing with you, change
your mind.”
John Maynard Keynes 1883 - 1946