What is it about chairing public companies that makes so many businessmen reluctant to accept the job and so many appointments committees unable to find suitable candidates?
A dozen or more top UK companies are currently sifting through headhunters’ lists with little enthusiasm. BP spent 17 months searching and had to go abroad for its man.
Corporate governance must take much of the blame for making shortlists shorter. Chairmen are usually current or past executives, but with governance codes insisting boards have a majority of non-execs, there are too few managers with boardroom experience.
And the rule that chief executives must not be chairman –-simultaneously or subsequently –- has cut off one traditional source. The rule limiting how many boards one person can head has limited supply further and the requirement to step down after nine years on a board removes many good people.
Companies that deviate from the code are punished by investors and chairmen can become subjects of highly-public personal campaigns.
The banking crisis is partly to blame too. It has forced out the chairmen of Lloyds, HBoS and Royal Bank of Scotland, leaving two of those banks to seek new heads and made their old chairmen less attractive to other companies.
Standard Chartered had to find a new chairman too when its head was made a government minister. The crisis also created a state-owned bank holding company needing a chairman: indeed, it is currently seeking its third head this year. And MPs’ criticism of banks not being headed by bankers severely limits the candidates list.
Off the shortlists too are those managers who equated a chairmanship with retirement. The top position requires more board meetings, committees and report reading than ever, especially when a crisis or major deal arises.
Not all executives have the skills to manage a board instead of a company and not all non-execs can sit on the centre of the table and lead debate rather than question it. Even so, there are good people not prepared to put themselves forward for the role.
It cannot only be pay. Rates have risen greatly with top company chairman receiving over £500,000 and, increasingly often, share options too. That might not be enough to make an executive go part-time but it is more than a portfolio of downtable non-exec positions would pay.
But chairing a company, especially trying to rescue one, can result in an ignominious end to a fine executive career. People appointed chairmen for their success as CEOs can, for a fraction of a their old pay, find themselves pilloried and humiliated. Chairmen can be as vulnerable as football managers when performance falters and a high-profile exit can make employment elsewhere impossible.
BP looked beyond the list of usual suspects when it chose Ericsson’s chief executive as its next chairman but that solution simply highlights the limited pool of indigenous available talent.
