(00:06) Ninder: Good morning Steven. Thank you for taking the time out today to speak with us. So, the first time I came across you, Steven, was through the NED awards and I must concede that as someone who’s sat on a few Boards, I didn’t realise that there was such an award ceremony out there. When I got involved with it, I thought “Wow, this is really, really good.
(00:35) Ninder: So for those who don’t know, could you explain who you are, the firm you work for and how Peel Hunt got involved in and what are the NED Awards.
(00:50) Steven: I’m Steven Fine, Chief Executive of Peel Hunt. Peel Hunt is a UK focused specialist Investment Bank and our main area of focus is on UK Public and Private Companies. We act as a retained Corporate Adviser to 153 public companies, we write and publish research on some 400 UK listed public companies and we have strong links to corporates through the advisory, the institutions through our sales and research products and actually direct to retail through intermediaries through our market making and trading and execution. So we have a very comprehensive joined up picture of the UK Public market space, the Shareholder space and the retail space, which allows us to what I would say, quite superior client information. As a consequence of that, we are dealing with boards all the time and whether that is Chairs, SIDs (Senior Independent Directors) or general execs, we’re coming into contact with them all the time. What we found some 14 years ago now, was actually the opportunity to start an Awards, to recognise Governance, Oversight, Stewardship, Best Practice was actually missing and could we do it in an effective fashion where we could properly and appropriately reward or recognise those who had contributed something quite special in those key areas.
(02:15) Ninder: So how did you first find, when you set them up in 2006, how did people react to you when you said you were setting the awards up?
(02:22) Steven: If I’m candid, in 2006, the world was very different. This was pre the GFC (Global Financial Crisis) and to be honest, I found the awards were actually nothing special. It was an opportunity for a few people to get together, NEDs at the time were seen to be nodding dogs, where the execs made the decisions and non-execs just sort of blessed them. The awards were really created by a lot of (please don’t take this the wrong way, whoever is listening), lawyers, accountants and PR would show up to the awards, have a drink, have something to eat, clap for whoever it was who won something, and then disappear off into the evening. It was what it was and those were different times.
I think the key change that occurred after the financial crisis where myself and, at the time, Dominic O’Connell, who was the editor of the Business Section of the Sunday Times, sat together and thought actually, we have got something pretty interesting here. We decided to completely revamp and go out and look for a new section of sponsors who we felt could help us take these awards onto the next level. I suppose the key thing here is to use the word “Perspective”. Perspective is quite an interesting word. What we did was look for sponsors who had a different perspective on the role of the Non-Exec, so we were not looking for a single bank or a single law firm, or a consultancy firm that would come in and be the overall sponsor of these awards. We were looking for a collection of organisations, that all had something slightly different and perhaps a bit unique to bring to the table to help us sift through this wide spectrum of Non-Executives and really help judge who would be the most appropriate that we should recognise from those that were nominated. That meant we had an asset management company and then we had an accountancy firm, a law firm and a consultancy firm and then we had a business school and then we had Women on Boards and then the Non-Executive Directors Association. Then the list went on and on and each of those would have a slightly different perspective on what a Non-Exec should be and how they should operate and how they should seem. That was then supplemented and all the sponsors would have a role as the judge and then that was supplemented by additional judges who themselves would have a slightly different perspective on what makes a good non-exec and how we should reward best practice and governance, oversight and stewardship. That then led to a far greater focus on Diversity and Inclusion so we could be very broad about what we did and how we did things.
(05:01) Ninder: So how did you pick these judges then and who are they and how did you decide that somebody makes a good judge?
(05:08) Steven: It’s difficult. How do you decide if someone makes a good non-exec and how someone becomes a good judge. You know how does someone become a good football manager – I mean everyone has their own ideas and we live in a world where everyone can manage a football team and judge a contest and be a judge on an NED Awards ceremony. I think the key is that a diverse group of individuals sitting around a table can actually outperform expert matters in any area, there’s been academic research written on that anyway. But I think it’s really important, that as long as you get the diversity right and that can be past winners, that could be the sponsors that have those different perspectives, that could be individuals from the public sector rather than the private sector. We even had Frances O’Grady as a judge from the Trade Union, so you get a different perspective and that is really important. I think that goes to the heart of what we are trying to do here. This is not a reward or a recognition just because you have a first past the post measure of ability. So the person with the larger number of votes does not win. If you are nominated, it is quite a complex process and a very, very thorough process. Maybe I should just explain that as some people wouldn’t quite appreciate how rigorous the process actually is.
(06:31) Ninder: It is very rigorous.
(06:35) Steven: So we launch it in the Sunday Times, the nominations process is open for a couple of months, and we encourage those people to nominate those people who they believe have done a good job. That’s a shortfall, so please write down who it is, what they have done and why they merit it. That goes in.
Those short forms are then collected by representatives from the Cranfield and Henley Business School. We then contact the Chief Executive of each of the nominated companies and create a long form. The long form could be some 1,000/1,500 words answering all sorts of questions about what has that individual done and why they merit inclusion on this list. So the Chief Executive of the company of the person who has be nominated is contacted to help us fill out that long form. Those long forms are then sorted and sifted by Cranfield and Henley Business Schools and they create a shortlist of six potential winners with a couple of reserves. Those six winners or nominated shortlist candidates are then put into a judging pack per category and they are sent to all the judges.
The sponsor of each of those categories then will contact each of the six nominated individuals on that shortlist and interview them themselves. So, you have the short form nomination, the long form nomination by the Chief Executive, the sorting and sifting by Cranfield and Henley Business Schools. We then have the separate interview by the sponsor of that category and then you have the judges’ dinner. At the judges’ dinner, that sponsor of that category will then present the six candidates to the broader seventeen judges, that sit around the table. Then there is a healthy debate: Who, What, Which, When, Why and How. Each judge has fifty points and those fifty points could go to one individual or it could be forty, ten, zero or twenty, twenty, ten or however many it might be and they are all added up and sent to the chairman of the judging panel. Those points are tallied up and you receive a winner. So, it is a very complex, rigorous, structured means of finding the right person that genuinely does deserve the accolade in that particular category.
I think the one thing I’m probably most proud of is that winners of these awards genuinely feel that they have won something quite special and I think that is a really good reflection on the hard work and effort that we put in to ensure the process is rigorous. It is tough, it is not easy to win this category, and that’s why I think people appreciate that they genuinely won something a bit special.
(09:20) Ninder: You spoke about that back in 2006, that it was quite tough to get people on board, and of course, you read the financial press and the role of the NED has become really important in terms of governance, so what do you think has changed/how much has it changed since you’ve been looking at these awards, how has the role of the Non-Executive Director really changed?
(09:51) Steven: I think the consequence of the Global Financial Crisis has had an extraordinary focus on regulation and when you focus on regulation, that then there has to be accountability and when you have accountability, it’s not just on the execs, it becomes a board issue. If the board are then accountable, and it comes down to whether it’s personal liability or connected liability or how you want to look at it, if there is accountability, you have to take these things very, very seriously. Now this builds up and there have always been strong non-execs, always been good chairs and great non-execs even before the financial crisis but I think since then, it’s been almost a quantum leap in terms of focus on what a non-exec actually does, how they operate and what they bring to the table.
(10:36) Ninder: I think that has been reflected from what I can see in the kind of candidates now being put forward for the NED Awards, some of them are amazing people, so you can start to see the right kind of people are now being attracted.
(10:55) Ninder: So we are in the middle of a pandemic, the role of the NED is probably more important than ever because of the changing environment, fast pace environment, what do you think NEDS will have to face between now and the next five years? Do you see the role of the NED changing over the next five years, do you think bearing in mind where they have come over the last fifteen years, do you see an automatic change?
(11:20) Steven: Well look, the concept of challenge is nothing new. But, actually I think it’s going to become a tougher environment, for execs in which to operate, in the way they traditionally did. Probably one of the best examples I can give is that the pandemic highlighted it very clearly, companies over reliance on debt. We’ve grown up on a debt binge for the last ten to fifteen years, declining interest rates and the ease of which you can raise debt. I think the pandemic suddenly highlighted that you could be on the board of a company that can suddenly have zero revenue for a reasonably large number of months, and it’s tragic, when you go from operating in hospitality, retail, dining, travel & leisure, entertainment industry, where you’ve actually had businesses physically close. If you’re on the board of those companies, you’re going to sit there and think, “ok, look, we’ve managed to restructure our debt that we’ve been able to, and banks and government have been quite willing and have been very helpful, so we’ve restructured the situation we are in and we’re either in reasonable or difficult or whatever shape we might be, but the chances of this happening again, are significantly higher if they happen once, than they ever were before. The chances of you sitting on a board of a company where you’ve got zero revenue for four months were almost miniscule, but the fact that it happened in March, April, May and June, happened once, means that the likelihood of it happening again goes up. So, therefore, as a board, are you going to think that we’ve restructured our debt, we’re in recently good financial shape et cetera, but would we rather have more equity in five years’ time than debt than we have now? I imagine the answer to that is probably, Yes, depending on where you are debt to Edi di et cetera. So, I think the focus of non-executives is going to shift slightly to how is the business run, how is the balance sheet structured much more so than it ever has been in the past. Historically, we have talked about Diversity and Inclusion, and we have talked about Remuneration and all these issues, but actually I think there will be a bit more shift towards the business itself, and the challenge to the execs on how that business is structured whether it’s balance sheets et cetera, perhaps more so than it has been in the past. Again, let us be clear, I’m not saying that any regulatory issues are going to subside, if anything, I think they are probably going to increase over time as well, so actually, so the accountability and the onus put on the non-execs, I think, is actually going to increase substantially probably, not just regulatory, not just operationally, but business focused as well.
(14:06) Ninder: Also people are looking now towards the non-execs almost from a societal perspective, let’s face it, corporate has been littered with the failures (we’ve already talked about Thomas Cook), the Germans had their Wirecard, in this neck of the woods (the West Midlands) we had Carillion (FTSE 250 company). I think almost now, you need boards that are completely agreed, need a mix of financially probing between equity and debt, but equally I think and I’d be interested in what you think, you need a board that now understands change and innovation because we are facing now an uncertain future. A future that will always be fast changing.
(14:57) Ninder: So, what are your views on that - what should a board look like: Those sort of contradictory bits - the risks versus the finance side?
(15:08) Steven: Culture and conduct have been huge areas of focus from the regulator and again they are seen to be part of a group cause of many issues for companies. The new buzzword coming from the regulator is this focus on operational resilience and again, I think that’s a consequence of the Covid pandemic as well. Operational Resilience covers a whole host of issues. There’s almost no issue where a company operates that isn’t covered by Operational Resilience. So, I think to understand that concept and be on top of that concept, and mix that in with a culture of a firm as well, I think it’s going to be very, very important. You can scroll back to Wirecard and Carillion, I mean where there were genuine concerns. Thomas Cook was a difficult business, overburdened with debt, and that goes back to the point I made earlier, I think the onus of non-Execs to be on top of a broader suite of their knowledge base and operational understanding. The traditional view of there is the big tower block, which is the company, and once a quarter this helicopter arrives and lands on the roof and the non-execs come out to the top floor only and stay there for half a day and then get back in the helicopter and go back off and they never see what else goes on, I think is gone. You have to know what is happening. There’s a walk the floor, understand the people, what is going on here and that is a very different concept to what happened before and there are many that want to do that, but never really had the opportunity to and I think there will be more of a push for that.
But really Ninder, to your question, I’ve kind of analogised to the way we’ve structured the judging panel of the awards themselves, it’s very diverse. It’s not just gender but it’s age, it’s ethnic background, it’s sexuality, it’s background of work and operations, it’s public versus private. It’s any number of criteria that fit in and that creates a phenomenal sense of debate and thought and questioning and challenging and understanding and I do believe, you know, by and large, that it gets you to the right results. Now whether the boards adopt something along those lines is to be seen. But I think if you compare our judging panel now to where we were in 2006, it’s chalk and cheese.
(17:41) Ninder: You spoke about Operational Resilience, I take that on board, traditionally, the views of the external NEDs were there to represent the investor shareholders and, therefore, they only thing they thought about was bottom line, dividends, and making sure that the shareholders are properly represented, I mean that was the traditional role of a NED. But people now look at NEDs, understanding, as you said, the wider stakeholder and this pandemic has seen society in different ways.
(18:21) Ninder: Do you think going forward now then, a NED has to be not just looking after investors, not just looking at whether you are operationally resilient and almost picking up on your point about diversity on the board, actually always looking at the wider stakeholder as they are talking about a wider stakeholder engagement rather than the narrow “Are we turning the money over as we’re supposed to and are we all getting the dividends?”
(18:51) Steven: Yes, I couldn’t agree more. I think the NEDs are there to protect all stakeholders. If you go back to the pre Global Financial Crisis, it was really more to support the growth revenues or profits or whatever it was for the company, over the last thirteen/fourteen years, it has broadened much more to include all stakeholders, including staff and customers and clients as well as investors. So, I think the important thing there again: it’s the diversity of, I suppose, oversight, the NED has to have for all aspects of the business.
(19:39) Ninder: A couple of last questions. One of your awards is the ‘NED to watch’, the Dame Helen Alexander ‘NED to Watch’, so perhaps you could let those who don’t know, who was Dame Helen Alexander and what is so special about this particular award that you make a special mention to?
(19:59) Steven: So, one of the most coveted roles in the NED Awards is the Chairman of the judging panel. I’ve been incredibly fortunate to work with people like Sir John Parker, Sir Roger Carr and Dame Helen Alexander and now Paul Drechsler. Dame Helen, founder of the Hampton Alexander review on Diversity, was a real force for good. She came in to chair the judging panel. Sadly, Dame Helen passed away and we thought that it was appropriate to recognise her and the contributions she’s made nationwide to the concept of diversity by giving an award in her name. We felt that the ‘NED to watch’ would reflect her contribution appropriately, because it’s about all those who are up and coming, those who are forces for good, forces for change and changing dynamics for concepts that affect boardrooms. It’s actually been a really interesting award to watch it grow and flourish and the quality of the nominees has been outstanding. It’s not for somebody who has been around for a long period of time, it’s actually those who have done something quite special in a relatively short period of time, from someone moving from an exec to a non-exec role, or those just started in a non-exec role, where, they really understand the concept of challenge to the board. So I’m delighted we have that award and I think it is very good recognition for the wonderful person that Dame Helen actually was.
(21:36) Ninder: A couple of observations before we look at the process and finish off, it’s interesting as you said back in 2005/2006, the NEDs were in the background, they were more of a stewardship function making sure investors are looked after. The role has widened and I think the problem we had with RBS up north and the cases that we now spoke about, means now that the NEDs are right on the front pages. They can’t disappear behind and they do bring an incredible set of skills. So, I think that it’s brilliant that there is a well thought out awards ceremony or category for NEDs and I think it’s important to encourage new NEDs to come on board.
(22:30) Ninder: Just a quick question before we talk about the closing dates and nominations, in your eyes, what makes a good NED? What does a NED bring? If a Chief Executive is brilliant at what they do, other than making sure the numbers are right, why would they need a NED? What sort of skillset do they bring to a board that a Chief executive wouldn’t have?
(22:57) Steven: It’s just wrapped up in that word “Challenge”. I mean: “why?”, “Explain that to me”, “I don’t quite understand that.” “Could you run through what that means?” An inherent curiosity I think is really important – I need to understand this better, my neck is on the block here as well and I have shared accountability with you, so you need to explain this to me: “Why we are doing this and what it means?” “It seems too easy”, “seems too good to be true”, “what’s happening here?” “What about if this happens?” “What if that happens?” Getting comfortable with understanding that is so important as a very straightforward, to use a cliché, a checker/balance. There is a check and balance. Unfortunately, unchecked executives can actually get consumed with their own self-importance and do things they shouldn’t be doing. So Governance, Oversight, Stewardship, Best Practice, understanding your regulatory obligations, living up to your regulatory obligations, having a vested, class infrastructure that can support regulatory scrutiny and external scrutiny are really important and very often an exec will get way too focused on the growth of the business and not look at the infrastructure required to support that growth.
(24:12) Ninder: Great, so we have time. How do you nominate?
(24:15) Steven: Go to the www.nedawards.co.uk/nominate and you will see a nomination short form on there that you can fill out. There are repeated reminders each week in the Sunday Times and we are posting a lot on social media, particularly on LinkedIn (Follow us: @non-executive directors awards), which will tell you exactly what to do and how to do it. The key thing here is nominate people that you genuinely believe deserve recognition, because they contributed something special and good in the world of governance and best practice.
(24:41) Ninder: Well, Steven, look, you’ve been fantastic. Thank you very much for not just explaining the ceremony but what a NED does and the impact I think that NEDs are having. I think businesses are taking a battering, reputationally over the years, I think the NEDs are coming into play, making sure that we find a rebalance. I think society is now looking towards NEDs to make sure that businesses (as you said) are operationally resilient, because employees have mortgages to pay, the whole economy relies on that circular income, wealth creation is so important, and I think you cannot (and well done to you) assume, that NEDs are now a lot more prevalent and a lot more central to decision making.
So, I’m going to let you go, good luck with the office move to 100 Liverpool Street during this pandemic, thanks very much and hopefully between the between now and the closing date, hopefully, we’ll encourage people to firstly understand what a NED does, secondly, put themselves forward as NEDs for the potential future and thirdly, if you know a NED that has done a superb job out there, get nominating.
(25:59) Steven: Get nominating: www.nedawards.co.uk/nominate go through your row of decks, check everything that you think is appropriate, and nominate those individuals that you really do believe deserve that recognition, because these awards are what they are there for.
(26:13) Ninder: Fantastic Steven, I’m off to have a cup of tea, so thank you.
(26:17) Steven: Thank you, great chatting to you always, Ninder.
(26:19) Ninder: Absolutely, thanks very much for your time. Have a great day and a great week.
(26:24) Steven: You too, take care. Thanks.
(26:33) Interview ends
Steven Fine has been a judge for the Non-Executive Director Awards for 13 years. He has been the Chief Executive of Peel Hunt for 4 years. Steven led the management and staff buy-out of Peel Hunt from KBC bank in 2010 and from 2007 – 2016, he co-ran the firm as Managing Partner and Head of Equities. Prior to that, he was a founder member of D. E. Shaw Securities International, which later became KBC Financial Products. Steven has an accountancy degree and holds a certificate in corporate governance from INSEAD.
Peel Hunt is an investment bank with highly rated, sector-aligned Research, Sales and Investment Banking teams, with a current retained corporate client list of over 150 listed companies, 1,100+ institutions who have signed up to receive its research, and a trading platform that makes markets in c.3,500 equity and fixed income products. Peel Hunt ranked 1st for research in the 2020 Institutional Investor (formerly Extel) Survey of UK Mid and Small Cap Brokerage Firms, while its sector teams achieved more Top 2 rankings than any other broker. www.peelhunt.com
Ninder's company Nachural Records still remains as the only British Asian label to have registered 9 number one chart positions in global music charts including no.5 in the US and UK charts and to have sold in every territory in the world. His current event and media production company (The Nachural Group) is a leader in the event production and media sectors operating both nationally and internationally (Signature Awards) and is currently working with a number of international brands. He has a considerable NED portfolio which includes chairmanship of The Wolverhampton Towns Fund, Board positions on the Accord Group, West Midlands 5G, West Midlands India Partnership, the West Midlands Growth Company, Wolverhampton University, The Black Country LEP, Trustee at Albion Foundation, Trustee of Victoria Academy and is a former President of the Black Country Chamber of Commerce.
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