Boards need urgent reform
ONE of the ideas being bandied around by Jeremy Corbyn’s Labour if they win the next election is to force large companies to hand over a third of the places on their boards to workers.
The very thought of being coerced by a Socialist government into ceding so many chairs round the mahogany table to a bunch of trade unionists modelling themselves on Citizen Smith will fill most shareholders with horror.
Labour’s remedies would be disastrous but it is hard to argue with their analysis that there is a dysfunctional and incestuous culture at the top of UK plc.
The list of FTSE 100 chairmen is a roll-call of the British business establishment.
A Daily Mail investigation found that more than nine out of ten in 2017 were men, and that there were a dozen knights plus a solitary Dame. The vast majority of chairmen are former senior executives, top accountants or civil service mandarins. Their average pay came in around £475,000, but can be much higher: £800,000 and above is the going rate for chairing a bank.
It’s hard, then, to dismiss the implicit criticism from Labour that these people are not the best-placed to challenge a faulty status quo, and that appointments need to be made from a broader pool.
The FTSE 100 is meant to be an elite index – so every company in it ought to be a beacon of best boardroom practice. It’s not always the case. At corporate raider Melrose, which shot into the FTSE this year when it took over GKN, the chairman is Christopher Miller, one of the entrepreneurs who set up the business.
He received more than £42m last year alongside his three co-founders. Now Miller may well deserve his multi-million pound windfall for the growth delivered to shareholders, but a payment of that scale is at odds with his responsibilities as chairman. Bluntly, with that much money at stake, it’s hard for anyone to be independent.
The company itself has acknowledged as much in a boardroom overhaul and Miller is stepping aside as chairman next year.
AND why have one FTSE 100 chairmanship when you can have two? This is the case for several chairmen, including Roberto Quarta, who presides at WPP – where there was an imbroglio over former boss Sir Martin Sorrell – and at medical devices group Smith & Nephew.
There is no express prohibition against this, but it’s ridiculous. People will be caught short if there are crises at both firms at once – as Peter Long found out when trouble hit Royal Mail and Countrywide – and it increases the risk of mono-think.
Despite their high rewards, chairmen do not always fulfil their responsibilities with distinction. The chair of Unilever, Marijn Dekkers, who received more than £650,000 last year, could surely have managed its plans to move its HQ to Rotterdam rather better. And why have two successive chairmen of Persimmon allowed Jeff ‘Mr £131m’ Fairburn to stay in his job?
As for the chairs of pay committees, their average going rate on the FTSE 100 was £127,000 last year. That soon adds up if you have several of these part-time roles, like Orna Ni-Chionna, who presides over the pay committee at Royal Mail, where 70pc of investors voted against its pay report. She receives almost £300,000 a year from a variety of non-executive directorships.
You don’t have to be a rabid socialist to conclude that too many of Britain’s boardrooms remain blinkered and self-satisfied. They risk having themselves to blame if the Corbynite nightmare becomes a reality.