Chair Roundtable: “Handling unforeseen challenges and controversies”
Laurence Vallaeys, Korinna Sjoholm and Tim Kemp
Following a spate of controversies in 2023, which threatened to derail fundamentally good businesses, Warren Partners recently ran a Chair roundtable exploring how Non-Executive Chairs can navigate unforeseen challenges and controversies.
It was a stimulating discussion examining the difficulties of dealing with unexpected, left-field events, with the following emerging as key themes and ‘lessons’:
- The cohesiveness of Boards and their ability to build a common, clear view was emphasised as critical – particularly in the case of hostile takeovers – where firm agreement on the upside potential to achieve a share price that truly reflects future realisable value, is paramount.
- As for activist shareholders, the consensus was that boards should not necessarily heed to their demands. Evidence tends to show they only create long-term shareholder value if they successfully acquire the business, arguably a strong reason not to give them a seat around the board table.
- Defence plans too, need to be framed appropriately with guests remarking that investment banks’ strategies (and their remuneration?) are not always aligned with the interests of the company they are retained to defend.
- Another strong theme was around the challenges of having to deal with questionable CEO actions – an alleged misbehaviour or a one-off judgment lapse. Many guests commented that situations often came down to whether the CEO decision was in line with a company’s values. “Breaching customer confidentiality, as NatWest found out at their expense, is not defendable however impressive their CEO”.
- In other cases of alleged misbehaviour, we were reminded that the old adage that ‘one is innocent until proven guilty’ is still generally seen as the sensible approach. “Unless a CEO has deliberately misled the board, a good chair should lean towards loyalty rather than pander to the press”.
- As for CEOs being too trusting of their management teams, failure to ensure proper controls are in place is unforgivable and whilst regulation is often seen as a sinecure, our speakers observed that “regulation does remind you of what needs to be done”.
- In relation to unforeseen challenges, it was pointed out that it does take a cohesive board and a brave chair to shift a business when it is ‘addicted to legacy revenue streams’. Advancement in AI was highlighted as a genuine issue of concern at Board level, with one attendee referencing a recent quote from Google UK and ROI MD Debbie Weinstein, “There are three topics all boards should think about 1) how will AI drive your top line 2) how can it drive productivity and 3) how should businesses organise their data to enable 1 and 2”.
- On a more positive note, there was genuine unanimity that the best way to help Boards deal with unforeseen challenges and controversies was ‘diversity’ – specifically the value of strong boards built around NEDs with complementary skills and experience but more fundamentally diverse thinking styles to avoid ‘group think’. The bravery of one NED who will speak up or disagree in moments of uncertainty and challenge can be a decisive moment and often comes from a NED who brings different life and business experiences.
- When it comes to having real sight of ‘what is really going on around here’, chairs recommended ‘being out and about’ and highlighted the value of ‘reverse mentoring’ with grass root level staff. “They are more likely to share unfiltered information and benefit from your coaching in a win-win way.”
- By way of sobering conclusion though, we were all reminded that “whatever you do, you are probably doing it six months too late!”