Denise Kingsmill: The vital role of boards

A dynamic and positive boardroom is crucial to British businesses that want to reinvent themselves and grab new opportunities.

by Denise Kingsmill
Last Updated: 06 Nov 2012

Towards the end of last year, the Financial Times ran a series of photographs of empty boardrooms, with an accompanying article by columnist Lucy Kellaway in which she described them as representing, among other things, 'isolation, pomposity, uniformity, complacency and, above all, extravagance'. Lucy has a quirky take on business, but in this view she could not be more wrong. Fill those empty rooms with the leaders and directors of the companies concerned and they are transformed into busy, dynamic places where real decisions are taken. These are places where groups of mostly talented and committed people with a common focus settle down to consider a range of big issues, and endeavour to get them right on behalf of the company.

I have been a non-executive director on the boards of public and private companies for more than 20 years. With only a few exceptions, I have found them to be positive places where constructive conversations take place about the business and its shareholders, employees and customers. There can be conflicts and strong opinions are expressed with vigour. The boardroom is not a place for shrinking violets or those who cannot fight their corner, but, usually, with the guidance of a good chairman, consensus is achieved.

Whether challenging or supportive of management, most directors have as their goal good governance, progress and growth. Which is why, even in these difficult times, pessimism is not the mood in most boardrooms. There is certainly a recognition of the difficulties of doing business at the moment, together with a hard realism about the chances of emerging unscathed from the economic crisis. But this is coupled with pragmatism and determination. For companies that have the search for growth as part of their DNA, the seeking out of new opportunities, markets and ways of doing business is an instinctive response; part and parcel of a survival mechanism that clicks into place during tough times.

This time round, as double-dip threatens, significant cost-cutting is no longer possible. The fat in most companies was pared away in 2008-9. Companies recognise, better than government, that ever deeper cuts threaten the muscle of growth. So alternative strategies must be pursued. Whole industries are being reconfigured as mergers, joint-ventures, and other forms of business agreements are increasingly being put in place, and companies find more creative ways to do business.

The failure of many so-called relationship banks to support companies through these tough times will be remembered, as sources of traditional finance dry up and alternatives are found. The chocolatier Hotel Chocolat recently raised £4m by issuing a 'chocolate bond'. Instead of interest, lenders receive annual supplies of chocolates. Other organisations such as Wikipedia are seeking voluntary subscriptions from their users. Even the Guardian is now charging for its iPad app after its original determination to remain free online. Enterprise investment schemes where investors get 30% tax relief on their initial stake and any subsequent capital gain is tax free are becoming increasingly popular. Recession, it seems, is the mother of innovation for some.

Fears have been expressed that corporate boards, preoccupied with the challenges of the downturn, will neglect the so-called 'softer' issues of corporate social responsibility, diversity, the environment and ethics, but I see no sign of this in the companies with which I am most familiar. There is, rather, a relentless focus on all matters concerning reputation, risk and regulation. These three Rs are at the core of many board discussions.

There is concern about the Government's policies, which seem to fly in the face of its warm words of support for business. British business will find it harder and harder to compete in the world economy unless there is a significant increase in airport capacity in London. Energy companies in Germany face substantial losses as a result of an apparently quixotic decision to abandon nuclear generation. Fiscal laxity in parts of southern Europe is a cause of concern, as is the fragility of the whole European venture. As the ownership of world assets moves inexorably eastwards - from an estimated 7% in 2000 to approaching a projected 40% in 2020 - the boardrooms of the west are increasingly focusing on how to do business in these rapidly growing economies. We have to be creative and work out what our strengths are and what these countries want to buy from us, and we cannot be too insular. As Howard Davies remarked in a recent speech: 'There is a limit to how much Crabtree & Evelyn soap or Dundee marmalade we can sell to China.'

We have an educational system that is the envy of the world. Many of our best schools already have branches in Beijing and Mumbai; our universities attract students from all over the globe. The City provides the world's best business services to multinationals. For all our preoccupation with reform of the NHS, the expertise and skill of British medical and surgical professionals are widely respected abroad. We have many businesses that are the best in the world and we must regain the confidence that we have lost through endless preoccupation with austerity.

In my experience, the boardroom is far from the isolated place of Kellaway's description but a place that is positive in attitude, full of energy and new ideas, and a vital force for change and progress.

- Baroness Kingsmill is a non-executive director on various British, European and US boards. Lady Kingsmill can be contacted on editorial@managementtoday.com.

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