60 seconds with… Alan Thomson

Chair of the board

4 min read

Alan Thomson is Chairman of Hays, the FTSE 250 recruitment business, and Bodycote, the FTSE 250 engineering services business. He is a Non-Executive at Alstom, the French conglomerate, and was formerly CFO of Smiths Group and the SID of Johnson Matthey.

How have boards changed over the last few years?

I’ve been on company boards since the early ‘90s and they have changed a great deal over the past twenty years – mostly for the better.

Board meetings are much shorter and more focused than they used to be. This is largely the result of more sub-committees which frees up time in the main board meeting. And for good reason, boards tend to be much smaller. When I left Smiths in 2006 there were 15 people on the board and when you have that many people around the table it’s all too easy for directors to hide. Today, with only 8 directors on that board everyone has to contribute.

However, the downside of a smaller board is the relative lack of executive representation, driven by the requirement of the Code for a majority of non-executives on the board. It inhibits the non-executives from getting to know their management team and it also limits the pipeline of future non-executives. Smaller boards are undoubtedly better boards and I wonder if we ought to reconsider the provision in the Code for a majority of non-executives.

What is the secret to an effective board?

I’m the first to admit that I demand a lot from my boards. Every non-executive on a board that I chair is appointed to every committee. This prevents the main board meeting being hijacked by committee matters and we don’t need to appoint an army of directors just to fill the committee posts.

A successful board needs directors who join for the right reasons. You don’t do it for the money. You do it to add value and to participate in something with a purpose that you believe in. When I retired from my executive career I knew I couldn’t spend all my time at home – in fact, I wouldn’t have been allowed to! As my wife once said, “I married you for life, not for lunch.

How important do you consider information to be in the boardroom?

High quality information in the boardroom is vital. We’ve moved away from a figures-focused board pack and broadened the scope considerably. We’ve reduced the number of meetings at Hays from 11 to 8 per year and the quality of our board papers has been instrumental in making this possible.

What single government policy change would you like to make to support British enterprise?

The chasm between Downing Street and British business seems to be growing. Politicians are fixated on issues such as remuneration and shareholder voting powers and they’re responding to the media pressure that ‘something must be done’ but without sufficient understanding.

I know some eminent businessmen who have tried to share the benefit of their experience with politicians but who have hit a brick wall and given up in despair. These days I do my best to give Number 10 a wide berth. How will the UK’s global influence change over the next decade? It’s only going one way and that’s down. We are preoccupied by our relationship with Scotland and Europe, to the detriment of strengthening links with China and India. We’ve been short-sighted in our outlook and we have not paid enough attention to the high growth regions of the world.

Which companies would you back for the next decade?

I back people not companies. And the leadership teams that I most admire are those at Johnson Matthey and HSBC.

Johnson Matthey is a first class British business which attracts the finest talent and has resisted the lure of acquisition-led growth. They are hi-tech and passionate about science. Their success is borne out by the numbers: I originally bought in at £6 per share and it’s now £25 per share.

In turn, HSBC is the one financial institution I’ve been consistently impressed with – and in large part this is thanks to Douglas Flint’s chairmanship.

What is the smartest business decision you’ve witnessed?

The company I ended my executive career with, Smiths Group, made two excellent decisions that everyone thought were crazy at the time.

The first was the decision to exit the automotive market in the late ‘80s. Automotive components represented 50% of Smiths’ business back then but we spotted a higher growth opportunity in the burgeoning aerospace industry and decided to divert our resources. A couple of decades later, after many successful years supplying the aerospace industry, we realised the market had peaked and we handed back a lot of money to our shareholders. We became smaller but more valuable. And we didn’t put the status that comes with size ahead of doing the right thing.

What is your golden rule?

Do unto others as you would have done unto you. Business is all about relationships and I need to go to bed knowing that I’ve treated people fairly.

And finally, if you could rip up the rule book…

I would stop all these accounting standards people issuing increasingly complicated rules and get back to basics. Accounts should focus on sales, profit and cash, not unintelligible terms that neither the board nor shareholders can understand.

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