THE boardroom is again under the microscope, with challenges recently raised over executive pay, lack of diversity, and business performance, not to mention how much boards actually know about the workings of an organisation.
The perception is that sometimes the board is an unrealistic place – creating unachievable targets for the business – and out of touch with the real life of its employees and customers. The TV programme Undercover Boss is perhaps testament to that perception, with chief executives left shocked by how their business works at ground level.
This raises questions about what the board does and how it should look to best serve a business. Should additional skills beyond the narrow remit of professional expertise be thrown into the mix? Is greater customer focus needed? There is no formula for the ultimate board. But exploring what it could look like is serious. Reaching a common understanding would benefit UK businesses and the wider economy, and shape the way progression and recruitment to top board positions take place.
I wouldn’t be doing my job if I didn’t start with the roles of the chief finance officer (CFO) and finance director. Among chief executives in the FTSE 100, over half have an accountancy or financial management background, according to the Robert Half FTSE 100 CEO Tracker survey. But while the finance leadership role has a firm position on the board, its remit has changed, especially after the recent economic crisis.
There’s more to finance professionals than spreadsheets. CFOs are seeing their responsibilities widen into business strategy, risk management, governance and regulation, as well as non-financial reporting and the need for sustainable business growth. A firm grasp of investors’ needs also looms large on today’s CFO’s radar.
The 100 Group, an organisation made up of finance leaders in FTSE 100 companies and other large private firms, has already identified this change. The 100 Group understands the importance of shareholder returns. But in a nod to building a stronger economy, it recognises the importance of long-term, sustainable business growth, as well as acting as a voice for good governance without over-burdensome, heavy regulation. This collective voice is perhaps evidence of the emerging role of new-look CFOs in the boardroom, with one eye on ensuring Britain remains a fertile landscape for business.
This isn’t just true for the UK. ACCA is soon to publish a joint report with the US-based Institute of Management Accountants, which looks at the career paths of future CFOs, from the perspective of current CFOs. This gives us an insight into the role of the CFO in tomorrow’s boardroom. The results, although not yet published, provide some interesting reading – global experience on the CV, breadth of internal and external stakeholder engagement experience, and deep strategy knowledge are seen as “must have” capabilities. And these skills are not necessarily confined to the finance role. Other positions on the board could benefit from greater experience in areas not always associated with board-level directors, like a grasp of marketing, PR skills, customer relations and so on.
Chief executives, chief risk officers and human resources directors have an equally important role to play. The interaction between these functions at board level is critical, especially when guarding against risk, managing potential crisis, and ensuring the business is geared up for survival in the face of new challenges are top of the agenda. But are there new places at the table that could further cement the business model designed to be the most effective and the most robust?
Lawyers in the UK are seeing their activity grow at the in-house level. The Role of General Counsel, research published this month and sponsored by law firm RPC, found that corporate counsel are playing a more active role in the strategy of their companies. While behind the US in terms of a legal presence in the boardroom, the evidence suggests that UK lawyers have a major role to play in key board decisions.
Boards have sometimes been accused of not appreciating the importance of social media in business strategy. Are we near to the emergence of a social media board member becoming the norm? Another role that could emerge is the chief collaboration officer, recently cited by two academics in the Harvard Business Review as worthy of a boardroom presence. The chief insights officer is not new, but could it become a more regular place on the board?
Diversity of profession is important. But so is balanced gender representation in the boardroom, which remains a challenge in the UK. The goal set by diversity czar Lord Davies two years ago of ensuring that a quarter of board members are female by 2015 could be missed.
The issue isn’t just about fairness or ticking the gender box, or even ensuring we have a more representative boardroom. As equalities minister Jo Swinson recently highlighted, there is more to it. A more diverse board brings with it different perspectives and broader experience, a rich mix of ideas, approaches to strategy development, and understanding of the customer.
These benefits apply beyond gender. Diversity can mean board members from overseas. As firms become more international in their outlook, that market perspective becomes more crucial. And we can’t ignore social mobility. This issue has long been seen through the lens of serving a corporate social responsibility agenda, when there is a business benefit to diversity and social mobility. At board level, it allows a firm to tap into a wider talent pool. That pool is wider than the narrow perimeters of the UK. Social mobility can be advantageous on a cross-border basis as well.
There should be nothing to stop a chief executive emerging from the slums of Latin America, bringing with them market knowledge and perhaps a new way of working that chimes well with rising markets. That’s social mobility and relevant business intelligence rolled into one.
Opportunity is a long-held core value for ACCA. And the combination of global standards and mobility means a qualification that is portable. It is just one example, but it means a female ACCA finance professional qualified overseas could be the next CFO of a UK business, bringing with her the bonus of market knowledge from her home country.
EASIER SAID THAN DONE
The ideal boardroom will include CFOs with a wider strategic outlook, new positions for lawyers and collaborators, insights chiefs and others, closer working between different roles, a focus on sustainable business, and an executive board that not only reflects the real world in its make-up, but which also understands the customer/client, and benefits from differing talent from a variety of backgrounds.
It’s easier said than done. But businesses and the recruitment industry have a proactive role to play, alongside organisations like the 100 Group, ACCA and other professional bodies, in shaping boards that will deliver in the best interests of the company, its shareholders, the UK economy, and the customer.
If you’re a chief executive, ask yourself if you’ve got the right mix around your table. Can you see your customers in your c-suite talent? The boards of the future will only succeed if you can.
Sarah Hathaway is head of ACCA UK. Professions Week runs from 21 to 27 October. Champion your profession at www.professionsweek.org