The competitive edge

Financial Times: "Companies that introduce better governance fast will win a huge competitive advantage"

The Financial Times reacted to the latest cries for greater numbers of women on UK boards from Labour politicians with an analysis of the difficulties of having effective non-executive board members.

Prime minister Gordon Brown said: “When more than half of graduates are women, it is completely unacceptable that some of our top 100 public companies have not a single woman on their boards – and that none at all have a majority of women on their boards.”
The deputy leader of the Labour Party, Harriet Harman, was, if anything, even more forthright. “Britain needs more women in the boardroom,” she said. “We’ll never get a proper meritocracy or truly family-friendly workplaces from male dominated boards. Businesses that run on the basis of an old boy network and do not draw on the talents of all the population will not be the ones that flourish and prosper in the 21st century.”
Average pay for Neds rose more than 6% in 2008, and even more impressively, the gain was 15% at companies that did not have a pay freeze for directorships. “Rising pay for non-executives reflects the increasing seriousness of the role, and the sense that stronger candidates are already being sought.”

But despite companies’ (lip service?) declaration of interest in more women on boards, the FT sees two problems: “It is not just finding the right people that is hard. Providing the right sort of induction and ongoing support for them is difficult too.”

What to do? Balance the advantage of independent outlook with the skill that comes of learning how a company is run to generate greater effect from Neds. Accomplishing that is difficult — “no easy answers at all to the question of boosting the quality and effectiveness of Neds” — but critical: The companies that introduce better governance fast will win a huge competitive advantage.”