Penny Hughes CBE is Chairman of The Gym Group and a Non-Executive Director at Royal Bank of Scotland and SuperGroup. Penny has previously been a Non-Executive Director at The Gap, Reuters Group, and Vodafone Group, among many others.
What changes would you make to UK boardrooms to make them more effective?
I’ve been a non-executive for over 20 years, have attended more than 90 AGMs and have served in UK, US, and European boardrooms – so I’ve spent a lot of time in boardrooms! From my experience, there isn’t one system that’s better or worse than others – they each have different features.
The boardroom is all about the integrity and quality of the people you have around you and the system and structure that supports these people. This system has changed a lot in the time I’ve been a director, as many organisations have tried to improve their board papers and ensure the key information is provided before the board meeting.
For me, you can’t have an effective board without an effective Company Secretary. Corporate governance literature hardly ever mentions the importance of the Company Secretary and their role is far from simply an administrative one. The executive need to invest in the Secretariat team to ensure it’s effective and well-drilled. It’s not enough to have a Secretariat team comprised of a Company Secretary and a couple of poorly-qualified assistants.
How can we better manage different stakeholder views in the boardroom?
We’ve come from a world where the board represented shareholders and where most board members would have defined their roles as creators of long-term shareholder value. But you can’t create long-term value unless you properly manage and represent all stakeholders. You need to be willing to listen to the interests of employees, the community, advocacy groups and the ever-growing longlist of stakeholders.
At RBS, for example, we run a variety of engagement sessions with all sorts of organisations, ranging from Friends of the Earth to the UK Debt Management Office. Our aim is to understand the views of our stakeholders and keep them front of mind in our decision making. I also chair the Sustainable Banking Committee at RBS and we aim to support the board in running the bank as a sustainable business that creates long-term value for all its stakeholders.
When I was at Coca-Cola, we had a regular report on our customers which sat at the front of the board pack, with the finances under AOB. Coca-Cola fundamentally believed that if you put the customer first and had well-organised teams then money was just the resource to support customer-focused decisions. This is an approach that’s never left me.
What would your perfect board pack look like?
Most board packs are too long and the number of committees has grown significantly. As a result, directors can sit on multiple committees in addition to the board and receive the same information in different forums. I think there should be greater and fuller delegation to committees – if an issue’s been covered by a committee that has appropriately-qualified directors then the issue doesn’t also need to be raised to the board. This will help streamline the amount of material the board has to read and process.
There also needs to be a view of what issues you’re going to tackle over the course of the year. A roadmap of what the business is handling gives the board guidance on what major decisions they need to make and when.
What issue do boards need a wake-up call on?
A clear issue is remuneration. I’m broadly in favour of extra transparency and clear performance criteria, but bringing executive pay more into line with the rest of the country is tricky given the global value of some of our senior leaders. They’re only human beings – they know their market value and what they can earn elsewhere, and we’re operating in a globally competitive market where we need to be able to attract and retain talent.
One option would be to only review a CEO or CFO’s fixed pay every 3-5 years, instead of annually – this would help to slow things down a little. Inflation has little impact on a CEO or CFO, and we should focus more on variable pay and properly aligning that to how the organisation is performing.
What is your proudest achievement?
Becoming the first ever female President of Coca-Cola at the age of 32, when the previous youngest President was 40. I then secured my first non-executive role at the age of 33.
What book is on your bedside table?
I’m currently reading Build Your Fortune in the Fifth Era, co-written by one of my fellow Non-Executives at RBS. It’s all about how technology and the internet are dramatically changing the way we live our lives.
What is your golden rule?
Stick to your principles. As an independent director you are bringing yourself and your own expertise to the table. A good way to test this is to explain the decisions you’ve taken to your mum and see if you still feel proud of them!