Helen Pitcher OBE, is featured in GOLD The Business Magazine of Cyprus. In the interview, she discusses the need to ensure that company directors are well chosen. She also emphasises that board members have to priorities the companies best interests, not just their own.
Below is an excerpt from the article. You can also learn more from the Gold Magazine website.
Everything Above Board
WHY A BOARD OF DIRECTORS NEEDS TO ACT IN THE COMPANY’S BEST INTERESTS, NOT ITS OWN.
By Adonis Adoni | Photo by Michael Kyprianou
In 2018, Carillion plc, one of the largest construction companies in the UK, announced that it was entering into compulsory liquidation. It was just one of the spectacular collapses in recent years of companies which, on paper at least, should never have reached that situation. At the heart of these failures were questionable practices and decisions at Board level, says Helen Pitcher OBE, the keynote speaker at an event organised last month by the KPMG Cyprus Audit Committee Institute (ACI), in collaboration with INSEAD Independent Directors Network on the subject of Directors’ Remuneration and Performance. Here, she speaks to GOLD about the need to ensure that company directors are well chosen.
We should not be surprised that money often takes centre stage when it comes to bad governance, says Helen Pitcher, noting that the attitudes of company directors haven’t changed over the years and they all want to maximize their earnings. But while the extra zeros on their bank statements also mean increased responsibilities and liabilities, becoming dependent on their own compensation can handicap their decision-making abilities. Various reports have indicated that high compensation packages for Board members, whether executive or non-executive directors (NEDs), can lead to the unwelcome practice of mutual back-scratching and the rise of cronyism.
“In the UK, investors have started to veto high salaries for directors but that has caused a number of CEOs to leave their positions,” she says.
Pitcher, who is the Chairwoman of the INSEAD Directors’ Network (IDN) and of Advanced Boardroom Excellence, has led numerous Board evaluations and served on various Boards at FTSE level, which firmly places her at the heart of corporate governance. One of the things she often says is that a Board will only be as good as the individual knowledge each member brings to the table. Unfortunately, most people stop their training as soon as they get an executive role.
“If you look at an organisation like Carillion, they were using cash to pay dividends to keep their shareholders happy,” she says. “No-one on the board wondered why they were burning cash while having a mounting debt. I honestly believe they thought that either the banks or the Government would bail them out. There wasn’t simply not enough financial knowledge on the Board to avoid this problem.” Add to this a fundamental lack of communication between the Board members and the Chairman and you have a company in crisis.
To Read more click here
To learn more about Gold Magazine click here.
