A UK perspective on corporate governance issues.
John McFarlane talks to Governance and Compliance about the misplaced value in bonus culture and why the board must be sceptical
John is Executive Chairman of Barclays, and was formerly Chairman at Aviva and a non-executive director at RBS.
”Can you briefly explain the role of the board?
The purpose of the company is to serve customers profitably in order to produce superior returns for shareholders. There is, therefore, a degree of commerciality that is needed for a board that we can easily lose sight of. The priority of the board is the future direction and strategy of the firm, the appointment of management, the measurement of performance, and initiating action based on the feedback to that.
The board needs to have proper oversight, but it does not necessarily need to be done by the board itself. Certain aspects can be delegated to committees to deal with in more depth, and they will make comprehensive reports back to the board. The role of a committee is important in picking up large chunks of the company’s governance agenda so that the board can spend more time on strategy management and performance.
What are the initial challenges facing an incoming chairman?
Initially you need to think about the future agenda and current performance of the company. That gives you a forward view which may be different to the actual situation – and that tells you the journey that you need to go on.
The first thing, therefore, is to determine whether the board and the management have the right priorities for the company going forward. Secondly, you need to ensure that you have the right management – in particular, the right chief executive and finance director. Thirdly, you need to see the board in action. Although you have feedback from historical reviews, your insight depends on the quality of those reviews. I like to see the board in action to determine whether we have the right size, mix and quality of participation. That is difficult unless you have some experience with the board……..”
Source: ICSA Governance and Compliance Magazine