Sir John Egan is former Chairman of Severn Trent, Chairman and CEO of Jaguar Cars and was previously CEO of BAA and President of the CBI. He is currently Chancellor of Coventry University.
What would you change to make UK boardrooms more effective?
Board appointments need to be more strategic. You have to get the right mix of people, with the right critical skills and complimentary psychologies around the boardroom table. The Non-Executives should be specialists in their field, who can add demonstrable value to the business. But you also need these experts to have different temperaments to take on the executive and suggest an alternative view if necessary.
All directors need backbone, but not everyone on the board should shoot from the hip and play the rebel card. Effective boardrooms rely on diversity — you need the diligent detail lover just as much as you need the agitator, and of course a consensus builder is essential in getting decisions made.
Has the way boards operate changed much in the last few years?
Boards used to be too big to be useful and were more about lunch and societal standing than stewarding and supervising. But with the influx of regulation, listing rules and guidance documents, directors are now much more aware of their legal duties and liabilities. Notwithstanding this progress, it strikes me that boards still have a long way to go — they’ve been given the power but don’t seem to want to use it. I don’t think Non-Executives feel the full weight of their responsibilities or have the same appetite for the business’s success as their executive colleagues, nor do I feel shareholders do enough to safeguard governance.
As for how we might engage the shareholders, I’ve often wondered whether there should be a special dividend to incentivise them to take their role more seriously. This would reward those who invest in stewarding the long-term health of the company and prevent those who don’t from having a free-ride.
How important do you consider information to be in the boardroom?
Information equips directors with the tools to fulfil their role, so it’s essential that it’s of the right scope and quality. As well as clear visibility of the company’s performance, it’s important to regularly benchmark performance against competitors and to source proper insight into how and what they’re doing. It’s information like this that can give the business a competitive edge. But it’s also important Non-Executives get out and about in the business to understand the operations. I always asked ‘If you had a magic wand, what would you do?’ to really find out what was going on from the people on the ground.
What government policy would you like to change to support British enterprise?
I’d reduce the tax rate. In my experience, the lower this is, the more inventive British business becomes. I’d also reduce the red tape around start-ups to give them more freedom to operate, perhaps even provide a tax exemption for the first 12–18 months.
Which companies would you back for the next decade?
If government policies weren’t so erratic I’d be keen to back ‘green’ companies, but it’s never clear whether or not the policies will be there in a year’s time. Hi-tech companies would also get my vote.
What is the smartest decision you’ve made?
Deciding to save Jaguar Cars and make ‘quality’ our number one priority. Anyone who knew anything about cars said it couldn’t be done, but we managed to save our reputation and turn around the company.
What book is on your bedside table?
Max Hasting’s ‘All Hell Let Loose’ — I particularly enjoy military history books.
What is your golden rule?
Satisfy the customer: understand what they want and deliver this. Investing in your customer in the most cost-effective way is what business is all about.