BOOKS: The way to a better board

BOOKS: The way to a better board - Hack through the thicket of lists and dodge the prejudices and you'll find sensible ideas on how to train directors, finds Howard Davies.

by Howard Davies, chairman of the FSA
Last Updated: 31 Aug 2010

Hack through the thicket of lists and dodge the prejudices and you'll find sensible ideas on how to train directors, finds Howard Davies.

Bob Garratt is big on lists: Thin on Top is full of them. Every element of corporate governance can, it seems, be condensed into a handy, easy-to-use set of boxes to tick.

So we are given 12 trend lines, 11 elements of the strategic cycle, 10 directorial duties, nine dials on the directorial dashboard, eight sources of corporate error, seven types of stakeholder (or nine, depending on which chapter you read), six thinking hats, five gold rings ... and a partridge in a pear tree.

If you like that flipchart sort of thing, this is the book for you. In the conference suites of three-star hotels all over the country, corporate awaydays are ingesting the same material, in that uncomfortable gap between lunch and the time when the serious drinking starts. For those more interested in the analysis and the argumentation, this thicket of lists must be cleared first.

Behind it, there is good sense. Garratt's main thesis is straightforward.

He believes that most directors are ill-prepared for the roles they are required to play; that many have only the vaguest understanding of the board's duties; and that few receive any training that might usefully correct these deficiencies. And, he argues, boards are weak on assessing management, and particularly derelict in their duty to assess their own performance.

I do not have Garratt's length or breadth of experience of UK corporate boards, so I cannot confirm this thesis. But I suspect he is not far from the truth, even though he may exaggerate to make a point. He is certainly right to point out that boards that are guilty as charged face a rude shock as they move to full implementation of the Turnbull Code, and begin to explore the implications of whatever emerges as the final version of the Higgs recommendations on the role of non-executive directors.

Those boards would do well to consider some of the recommendations - generally sensible - that make up the second half of Garratt's book. He has useful things to say about how to train and develop directors, how boards should interact with management, and how to evaluate a board's own performance. It is jargon-rich but digestible.

So why can I not be more enthusiastic about Thin on Top? For three reasons (this list business is catching). First, because the book is littered with basic errors of fact. There is no such thing as the London Stock Exchange's Purple Book. Paul Myners did not write a report for the Insurance Industry Association - indeed, no such Association exists. There is no company called Mercedes-Benz. I could go on.

Second, the book is deplorably edited. For Nicholas Brealey's sake, I hope it was not edited at all. We learn at least three times about the Institute of Directors' chartered director qualification - each time as if we have never been told of it before. Surely a publisher should ensure that a book is coherent and not a set of random jottings?

Third, Garratt allows his personal prejudices to intrude into the argument.

We learn a lot about his interesting views on the EU, which has begun 'its long slide into irrelevancy and impoverishment'. The British empire, by contrast, was inspired by 'the ancient Greek Corinthian ideal', which led to the creation of 'a truly disinterested administrative elite, in the fee-paying school system'. It is surprising that the natives were not more grateful.

What this has to do with corporate governance, or the price of fish, I cannot say. But it certainly devalues an otherwise useful work. A book that speaks at length about the activities of the Commonwealth Association of Corporate Governance but not at all about the European Commission's work in the area is likely to mislead. The Commonwealth Association's work, however good, will not make it on to the statute book. Aspects of the EC's Winter Report, for better or worse, may well lead to new legislation in London, and even in Corinth.

Thin on Top; By Bob Garratt; Nicholas Brealey pounds 19.99; MT Price pounds 16.99.

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