NEDs ‘needed more than ever’ in times of uncertainty
Board Agenda
The role of non-executives is more important than ever in the current uncertain economic environment, according to one of the City’s most highly respected board chairs.
November 2022
Ruth Cairnie, chair of Babcock International, said: “NEDs play a fundamentally important role on the boards of corporations. But at a time of major challenge and major uncertainty, that role is even more essential.”
Cairnie was speaking during a special webinar, hosted by Board Agenda and The Sunday Times 2023 NED Awards, to explore the role of non-executives in keeping their boards focused on strategic priorities while firefighting a raft of major risks. Inflation at record levels, recession, the invasion of Ukraine, soaring energy prices, and disrupted supply chains have all combined to make this one of the most difficult periods for business in recent times.
“If you’ve got the right relationship, the senior management call you and have an offline conversation.” - Irene Dorner
Cairnie, also chair of the NED Awards judging panel, warned many of the background elements that business leaders have assumed would be around forever—relatively stable geopolitics, globalisation, low interest rates—could no longer be taken for granted. “We’re going to have to challenge ourselves on our assumptions in a more profound way than we have for a long time,” she said.
The panel’s discussion ranged across key topics for boards as they manage their way through the current set of risks.
One area the panel agreed was important during difficult times was the need for “informal” discussion between non-executives and management.
Irene Dormer, chair of the specialist consultancy Controls Risks and a former winner of the Private Equity NED Award, said it was ever more important for non-executives to “challenge” management but also listen to them. And this may mean more informal conversations.
“One thing that is happening more and more, not just for the chair but for the non-execs too, is that if you’ve got the right relationship, the senior management call you and have an offline conversation. And they can feel they’ve actually tapped into your expertise outside the board meeting,” said Dormer.
Simon Gorringe, an awards judge and head of Santander’s banking and corporate finance in the UK, said the subject of conversations had changed. Talk about the cost of operations and expansion had, to some extent, given way to discussion of more pressing matters: financing, supply chain resilience and the supply of labour.
Cairnie, also chair of the NED Awards judging panel, warned many of the background elements that business leaders have assumed would be around forever—relatively stable geopolitics, globalisation, low interest rates—could no longer be taken for granted. “We’re going to have to challenge ourselves on our assumptions in a more profound way than we have for a long time,” she said.
The panel’s discussion ranged across key topics for boards as they manage their way through the current set of risks.
One area the panel agreed was important during difficult times was the need for “informal” discussion between non-executives and management.
Irene Dormer, chair of the specialist consultancy Controls Risks and a former winner of the Private Equity NED Award, said it was ever more important for non-executives to “challenge” management but also listen to them. And this may mean more informal conversations.
“One thing that is happening more and more, not just for the chair but for the non-execs too, is that if you’ve got the right relationship, the senior management call you and have an offline conversation. And they can feel they’ve actually tapped into your expertise outside the board meeting,” said Dormer.
Simon Gorringe, an awards judge and head of Santander’s banking and corporate finance in the UK, said the subject of conversations had changed. Talk about the cost of operations and expansion had, to some extent, given way to discussion of more pressing matters: financing, supply chain resilience and the supply of labour.
Staying the course
But Gorringe also stressed the need for boards to consider opportunities as well as the risk they face. “With risks and challenges come opportunities as well. When we run our business, we spend a lot of time trying to maintain a focus on long-term strategy.
“Strategies don’t tend to last very long when things get difficult, and often plans need to be adjusted. But the long-term strategic direction and the goal…we can’t lose sight of that just because things get choppy and noisy outside.”
“One important thing is for the non-executives to be ready to ask the questions nobody else in the room is asking.” - Charles Howarth
Charles Howarth, an expert on mergers and acquisitions at law firm CMS, stressed non-executives have a crucial role in strategy development. “One important thing is for the non-executives—as people not necessarily talking to the execs day in and day out—to be ready to ask the questions nobody else in the room is asking.”
The NED Awards are now open for entry. Ruth Cairnie argued it is important for NEDs to be recognised. “They play an absolutely essential role: they are critical to our whole governance structure, critical to the success of UK companies and more important than ever.”
This Board Agenda webinar in association with the NED Awards 2023, is available on demand now, and can be freely accessed here.
