Baroness Hogg is Chairman of the FRC and Frontier Economics, SID at the Treasury and BG Group and a NED on the board of the John Lewis Partnership. She has also been appointed to lead the tender process that will appoint a new body to oversee Libor.
How has the UK Corporate Governance Code improved boardroom behaviour?
I am pleased with the impact we have had through the FRC’s updates in 2010 to the UK Corporate Governance Code. Risk is now firmly on the board agenda and many boards engage in a sophisticated debate about their risk profile and embedded assumptions, as well as considering the all-important matter of internal controls. Annual re-election of directors has been another significant development to the Code and I believe this has helped to channel the energies of the investment community towards more effective shareholder stewardship. Our amendments in support of gender diversity were certainly ahead of the curve and whilst there is a long way to go, the rate at which women are being appointed to boards is moving in the right direction.
We have just released the latest updates to the Code and I hope that the new requirements on FTSE 350 companies to tender their audit contract every ten years will be a spur to the effectiveness of the audit committee.
Beyond adherence to the Code, what else have you seen make a real difference to board effectiveness?
No matter how effective a Code may be, there is no substitute for the quality of the Chairman. I remember reading Adrian Cadbury’s excellent book, Corporate Governance and Chairmanship: A Personal View, where he likened the ideal Chairman to someone at the tiller of a boat. As he explains, the mark of a master helmsman is one who quietly navigates the boat along its rightful course with no sudden movements.
How could, or should, the role of the Company Secretary evolve to better support the board?
The Company Secretary can be a tremendous asset to the Chairman. The Company Secretary should be supported by a competent PA who shoulders the burden of the administration, freeing them up to perform a more strategic role and provide wise counsel to the Chairman. That said, I would not class ‘minute-taking’ amongst the administrative duties to delegate. Minute-taking is a fine art and something I do myself, as Chairman of Frontier Economics.
How important do you consider information to be in the boardroom?
The ability of most companies to generate information is exploding but the capacity of the board is not. It can also be a challenge for report writers who don’t sit on the board to appreciate the needs of their audience, who are concerned with the bigger picture and not the operational detail. Boards need recent and relevant information to support the decisions they’re required to make, but getting this right is far from easy.
How can we maintain the UK’s global influence?
Britain needs to remain an attractive home for capital and we shouldn’t forget this. Whilst reform within our financial services industry may be needed, we must take care not to throw the baby out with the bathwater. Our mission at the FRC is to promote “high quality corporate governance and reporting to foster investment”, so we believe we have an important role to play in nurturing our capital markets.
What book is on your bedside table?
Thinking, Fast and Slow by Daniel Kahneman – the Nobel prize winner who has devoted his life to studying the psychology of decision-making.
What is your golden rule?
Before accepting a seat in the boardroom, do your homework. You need to meet the auditors and the other directors, not just the Chairman. It’s important that there’s at least one other person on the board who you believe you can ‘triangulate’ with, someone who will back you up when you challenge the status quo.