Host

Philippa Lamb

Guests

• Baroness Helena Morrissey, financier
• Peter van Veen, Director, Corporate Governance and Stewardship, ICAEW
• Kevin Davidson, CEO, Norman Broadbent

Transcript

Philippa Lamb: Hello and welcome to Behind the Numbers. I’m Philippa Lamb and today we’re discussing a pervasive problem – board-level groupthink. How do you spot it? And how do directors, board procedures and government reform all play into breaking its grip on businesses and their decision-making?

Baroness Helena Morrissey: Instead of it becoming a topic that we would discuss, I was told it was completely off the agenda.

Kevin Davidson: Your role in this board meeting is to be the devil’s advocate. So come prepared to be the devil’s advocate.

Peter van Veen: I have not met a CEO that doesn’t get prickly when challenged.

PL: Digging into that with me today we have financier Baroness Helena Morrissey; Peter van Veen, Director of Corporate Governance and Stewardship at ICAEW; and Kevin Davidson, who’s Chief Executive at leadership consultants Norman Broadbent. Hello, everyone.

Helena, you’ve written a lot lately about the dangers of groupthink – I think informed in part by your time at St James’s Place. Listeners may know that’s one of the UK’s largest financial advisers, and that it’s now facing some questions about how it charges. I know you joined in – it was 2020, wasn’t it? There had already been something of a scandal there about sales incentives. I’m guessing you went there thinking they wanted fresh ideas about a better way forward. How did that go?

HM: Not as well as I’d hoped, that’s for sure. I was recruited in the latter part of 2019 when the company was already, as you say, receiving some censure – The Sunday Times, I think it was, was writing a piece almost every week on their ‘cufflinks and cruises’ sales incentives. And so I joined in the full view of that and made it clear I was something of a change agent, and they said that’s what they wanted. And the reason I’m speaking up now is not to layer on all of – you know, people are piling on to poor old St James’s Place, and they’ve got a new CEO and a newer CFO, and I’ve got several friends who work there who are some of the best people that I know, so I wish everybody well. But I think we do need to look back at lessons learned. And I did raise it, it was in a national newspaper, in The Telegraph in January 2020. There was an interview about me joining St James’s Place board and the journalist said, “Let’s talk about the fees, what’s your view on the fees?” and so forth. And so I just answered honestly that I didn’t feel they were straightforward, they were somewhat opaque, and I was concerned.

PL: How did that go down?

HM: Well, very badly. So that was a great disappointment to me, that instead of it becoming a topic that we would discuss, I was told it was completely off the agenda, and not a single board director reached out to express any sympathy with my view or to discuss, you know, how we go about resolving this. I actually ended up having to apologise to the CEO, rather than having a proper discussion about it. And it’s a great shame now, because, of course, the company has fallen out of the FTSE – the share price has fallen quite precipitously – and obviously the company is now under a lot of pressure. So I don’t say this as “I told you so”; I say this because I feel we need to learn from when people do raise their heads above the parapet, as it were, and point out something, particularly as a non-exec director. You’re supposed to be independent, you’re supposed to be coming with challenge, you’re supposed to support the executives, but also to be, you know, a critical friend, as it were.

PL: So that was a huge red flag? How quickly did you realise that it sounds as if that was emblematic of the way the whole board was run at that time – there were things that were not to be discussed?

HM: Yes, it’s difficult, because I do want to be completely honest and fair and say that when I joined, obviously it was only just before we went into lockdown, and so I think some of these issues might have been dealt with a little bit differently if we had been face to face. Clearly there was a formality around how we met over Zoom – we couldn’t have those sort of sidebar conversations in the corridor about something that you might have felt needed to be raised in the boardroom itself. So I do think that’s something to bear in mind.

But yes, it was. We were focused on a lot of very important things, but I just felt this focus on the client and on the fees – which ultimately became a regulatory matter; the FCA came after St James’s Place about it – it just could have been a stitch in time. It really could have been pre-empting problems as well as obviously, you know, now over £400m has been set aside for potential claims.

So it is one of those things where you think, what could have been done differently? How could we have avoided closing down a topic – and that’s the definition, really, of groupthink. I mean, people think groupthink is people just happily agreeing with each other, and it’s a nice, cosy club; but actually it’s more pernicious. It’s about shutting out dissenting voices. And so I was that lone voice. You know, I look back on it and think I could have done things differently; it’s not just the board that was at fault. But we should be learning all the time from mistakes like that, and thinking, how do we make things better? How do we mitigate the risk of groupthink going forward?

PL: So as I understand it, you rapidly discovered you weren’t going to be able to fix that, and you left. Kevin, I’m interested to ask you – you carry out board effectiveness reviews, don’t you, for clients? Do you see that sort of thing often?

KD: To a greater or lesser extent, yes, in almost every instance, you will. And it may be on a particular topic that’s off topic, and then there might be quite rich debate in other areas. I think when we’re doing the board effectiveness reviews, it’s the ability to really pinpoint those topics where there isn’t a richness of debate, and looking at how decisions are made – are decisions made by rubber-stamping or as the result of a nice, healthy debate? – and us then bringing that to the attention of the board and the chair. If there’s a culture of rubber-stamping, we really need to make that very clear to them as a result of the effectiveness review.

PL: How does it work in practice? Does it tend to be one strong character who’s setting the agenda about what we’re going to talk about, what we’re not going to talk about?

KD: Again, I think there’s not one. It can be a dominant kind of rock star – you know, the Jeff Skilling/Enron type, the smartest person in the room. Or it could be that the other individuals there just don’t feel they have a particularly strong voice or, in less professional boards, the non-execs are not well-enough informed: they’re not reading the papers; they’re not asking the right questions; they’re not displaying curiosity.

I think in Helena’s example, she clearly demonstrated the curiosity, the “why”, and it got shut down. In some instances, the curiosity isn’t demonstrated, the “why” is never asked. We’ve just completed a board survey in collaboration with BDO, which we’ll be publishing in September – we just closed it last week, with 250 respondents – and when asked what’s the most important question a NED [non-executive director] can ask, almost all of them are “why”, and with some subtext to the “why” – but it’s the “why”.

PL: Peter, governance is your area – is it much talked about in governance circles?

PVV: Yes, it is. And in particular, the lack of challenge – or the lack of timely information to have informed decisions – are really critical parts of the debate. And we see this coming back time and time again when there is a failure of some description at board level so that directors are then obviously in the firing line. And when you speak to them off the record, so to speak, they kind of say, “Well, I wish I’d asked that question when I started,” or “I kind of asked the questions, but I never really got a satisfactory answer to a couple of things.” And they allowed that to continue rather than, as we’ve just heard, take that a bit more forcefully as a stance.

I think that there are lots of lessons from that, from those kinds of lapses, and also what our members tell me. Let’s not forget, our members sit on some of the more challenging board positions, often as chairs of audit committees where they are being held personally liable for the accuracy of reporting, the accuracy of information, and they absolutely need to challenge and ask the questions if they’re not happy with what they’re getting, because their personal reputation is on the line. And that goes for most NEDs, by the way – it’s not just our members who chair. And so that is a really important thing to consider. But I heard this – actually it was one of Kevin’s colleagues – who told me this rather insightful observation that when you join a board you have that opportunity, and you should take it, to ask those simple, almost the idiot questions, because that’s your opportunity to ask one-on-one questions and say, “Well, how does that work? And why am I only getting the board papers 24 hours before a meeting, or two days, and at 700 pages?” It’s not just that, but also just the things that you’d be too embarrassed to ask six months or 12 months down the line, because by then you should really know it, shouldn’t you.

PL: It’s really interesting that you say that, because I wanted to ask about red flags to watch for. As a potential NED or as a potential director, what questions should you be asking – perhaps before you join, but also when you’ve just arrived?

HM: Clearly the mistake I made in that situation – it was my first non-exec role on a PLC board, so I need to stress that as well – so I guess, again, you’re learning as you go along. And I think I had a view that a non-exec director had more influence than they do. Now, I’ve learned since that you can have influence. What I should have done – and this is as much self-criticism as it is a criticism of St James’s Place – is that I should have developed allies around the board table and not just sort of rolled over, as it were, and played dead. But I just felt I’d made a terrible mistake, because I was a newbie.

I think nowadays I would be certainly doing a lot of due diligence. And if they said, as they did at that point to me, “We want you as an agent of change, we are committed to change,” you know, I would then probe them on, well, how are we going to do that? Then I would ask the next question, and I wouldn’t just take that at face value for any company I was joining. And I since have tended to join companies where I felt very culturally more aligned, and I feel it is still, even if you’re the chair, quite difficult to change the culture of a company from a non-exec position.

I do want to emphasise that to people thinking of joining boards, because of something else that happened – again, I don’t want in any way to pile it on – but at the time, because I had said these things about the fees, I then started to be seen as the people’s champion, or the consumers’ champion on the board. This was before consumer duties, so this was not official. So I started to get complaint letters sent to me from individuals who were clients of St James’s Place, and again – partly because of lockdown – I would then obviously have to send them to the department that would be looking into the complaint, because I wouldn’t have the intelligence – or the information, I mean – to develop an analysis of what had happened. But I never saw them again. I would ask, “What happened about that? You know, I was personally written to, I need to be personally involved in the resolution of that complaint.”

PL: You didn’t get that?

HM: I didn’t get that. Now again, I don’t know if that was because it was lockdown and correspondence – particularly postal correspondence – became quite challenging for people to work through, but it made me feel very inadequate as a representative on the board, really, because I felt people had taken the trouble to write to me, and I had no idea whether the complaint was being resolved to their satisfaction or not. So again, understanding it, I think that was quite unusual – I think the circumstances compounded that problem, but I would again advise anybody thinking of becoming a non-exec to develop the parameters around your role, particularly if you’re doing a particular role where you might be seen as championing some particular interest.

PL: It’s tricky, isn’t it? You’re a newbie. You don’t want to tread on toes. You do need to feel your way. And yet, there are questions to ask. Do you have thoughts in your head about what people should ask as soon as they arrive, Kevin?

KD: I think, just expanding a little bit on Philippa’s point around the complaints – sorry, Helena’s point – that came from some of the clients, how much are the stakeholder voices sought and listened to and integrated so that you don’t have ivory towers? Because, particularly in larger organisations, it can become ivory towers, and it’s an echo chamber of one another, rather than listening externally. There are the big examples – Boeing, for example, that just stopped listening to the supply chain, stopped listening to clients, where you get in a really a groupthink situation, where the implications of that are astronomical, in terms of lives lost, you know?

So I think seeing where the stakeholder voice comes from, and how it’s acted upon, can just be things like: do we have employee engagement surveys? How are they conducted? What are the results of those? What are the trends looking like? Having next-generation shadow boards that have got the voice of the employee that you should be able to participate in and listen to as a non-executive director and, critically, the executive not feel that that’s a threat to them. So having that safety for the executive; and sometimes you’ll have a chief executive who has got that kind of protectionism, and it’s difficult to break that – and I understand that as a non-executive it’s very difficult – but I think what works best is where the chief executive is open to challenge, and is open for you to meet with people in their team and talk to their team and know that whatever feedback you’re going to come back with, an opinion is just all with good intent, and it’s all ultimately to protect the interests of the company and the broader stakeholder community.

PL: It’s about culture, isn’t it – board culture? But of course, boards create their own cultures, don’t they, so there can often be very little clarity around what your role is and what they’re expecting from you as a non-exec, and what you’re imagining you’re there for. So what needs to change there to stop that happening?

KD: I think again, coming into board, you really want to be comfortable with the chief executive, and you really want to be comfortable with the chair, and you need to look at their style, their track record. We were chatting about this a little bit earlier. I think leadership’s changed so dramatically in the last 10 years and accelerated post-Covid. But a lot of people who were successful in business in the last generation were command-and-control – you know, I’m not to be challenged. That’s changed dramatically now, but a number of those individuals who were successful on that basis have found themselves as the chairs of large organisations today. And if that’s what they were, and that’s what they still are, I would definitely be very wary about joining. I think in time this will change, because I think as a society we’re changing. You know, we were talking a little bit about painting, earlier, and the encouraging debate, encouraging your children to have a voice, not just have deference to authority in the way that we were probably brought up. So I think, in time, it will ultimately evolve. But I think those are some of the cultural issues right now that we need to be aware of.

PL: Transparent conversations are hard to have, for everyone? What are your thoughts on this, Peter?

PVV: The role of the chair is a really important one, and the chair is not the CEO. Often, though, they’re ex-CEOs and they take that mindset of, “I’m in charge. I’ve got to put my foot down when I don’t agree with something.” That is not a good chair. And chairing is a skill – I think we’ve all had to chair meetings that have been challenging and difficult. But for the chair, it’s creating that safe space for discussion, debate and questions, and if they’re not doing that, they’re not doing their job as a chair. Because, you know, if people feel excluded from the conversation and the chair and CEO are a little too close in the same thought process, then they’re just not doing their job properly. I mean, I have not met a CEO that doesn’t get prickly when challenged.

PL: Really?

PVV: No, well, almost never. I mean, at some stage you think guys, you know, I’m working 20 hours a day, 16 hours, 12 hours a day – whatever – I’m on top of this, give me a break. You know, at some stage you’re going to get that, and that’s fine, but the chair needs to manage that. The chair needs to say, “OK, I get it, but let’s take a step back and let’s nevertheless have this conversation, because we need to have it,” and not allow the CEO to kind of throw their weight around and start shutting down conversations and the chair being complicit in that, because, well, you know, “We don’t have a lot of time, and we need to move on to other things, or more important things.” I’ve seen that happen time and time again – board members being shut down because they just don’t want to have that conversation. It’s just too uncomfortable and there’s always something on the agenda that can be prioritised to take over from that conversation. And really it’s the chair’s role to ensure that that doesn’t happen.

PL: But most of the stuff we’ve talked about so far has been about boards policing their own behaviours, and it’s self-regulation. What do you feel is necessary on the corporate governance front to make this happen, regardless of what boards might choose to do?

PVV: Yes, it’s a difficult one, isn’t it? Because if you start regulating and telling boards what they must and they mustn’t do, you end up with a bit of a long checklist.

PL: Sure – and the burden on business and all the things that, you know, mitigate against it.

PVV: And the burden on business, and you stop conversations. We already see this with a number of board initiatives where boards need to consider or discuss various aspects of corporate governance –it’s in the corporate governance code – and it does happen, but then it doesn’t get minuted, because there is a regulatory aspect to it. You then have lots of off-meeting conversations, and you only get the final discussion minuted. And that’s fine up to a point, but you do need to keep the board as that safe space to have those informed debates and to challenge opportunities, and not start taking things off agenda because you don’t want it reported, or you think the regulator’s looking over your shoulder. Clearly, in banking, that is the case, but for most other companies, I’m not sure the regulations need to be there to force board members to be able to challenge.

PL: Helena, I can see you’ve got thoughts on this?

HM: I wanted to come in because I don’t think you can codify culture. I actually think it’s a behavioural issue. It’s how people treat each other and listen to each other. I just wanted to share an example of the opposite of groupthink that I have had, and it wasn’t a board situation, but when I joined Newton Investment Management many, many years ago – 30 years ago – the founder, Stewart Newton, had built a whole investment philosophy, and the business, on the basic idea that no one has a monopoly on great ideas. And it was fundamental to the whole way that the investment process worked, that multiple perspectives were drawn into the thinking. And effectively that meant that we, individually, whatever our status – or lack of as it was in my case, at the time – had the licence to disagree; and the licence to disagree in a very overt way.

So sometimes, for example, if I wasn’t particularly contributing or was just sort of joining in with everybody, Stewart would tell me, “Helena, I’ve recruited you because of your differences. You’ve got lots to offer.” He would make me come up with my thoughts, and that – well it got you in the habit of it. It’s probably why I challenge everything now – probably a bad habit to get into, eventually – but actually having that licence to disagree and then having someone who gives you the confidence or helps you build the confidence – because I do think confidence is a skill that can be developed, including in the boardroom – that combination, then, is I think, what we need in the boardroom.

You started by talking about this as a pervasive problem, Philippa, and we keep having problems. We had the financial crisis being the most obvious example of groupthink, and all came crashing down, and we still did not learn. And so I think now perhaps we need a devil’s advocate in the boardroom, someone who’s appointed perhaps on a rotational basis, to be the challenge. And we need to say very overtly to people, OK, we don’t want to leave this room with everyone happily agreeing with each other on all these very difficult issues. We want robust debate to the point where, you know, we want fireworks. We want sparks to fly. We do want dissent here. We’ve had a lot of corporate governance improvements. We’ve shaken up diversity demographically in the boardroom, but we still haven’t got across this licence to disagree.

PVV: I just wanted to come in there for a minute. I think Helena touched on the point that it’s not just about diversity in terms of the faces around the board. It’s about diversity of thought.

PL: Absolutely. And I really want to get into that. I think that’s a key point. I would just like to ask Kevin, his thoughts about – obviously, Helena’s previous boss was great and a self-starter in terms of hearing every voice in the room and making everyone feel they could contribute – but, training for directors, should there be more? Should they be more open to the idea?

KD: Absolutely.

PL: Do you see that though? Do they feel they need it?

KD: I think the ones that feel they need it, probably they aren’t the problem. It’s the ones that don’t think they need it. And I think that’s one of the things that we will always be observing when doing board effectiveness reviews, as well as the level of self-awareness that the board have and that the chair has. And I think training is so essential. You know, there’s the Financial Times NED diploma – I did it 12 years ago or something – and the IoD, a lot of these programmes talk about behaviour. It’s not just understanding the code, it’s about the appropriate behaviours. And it’s back to that point: what made you a successful executive is not necessarily going to make you a successful non-executive. And if everyone had to have, once a year, a refresher course, and a big part of that was about groupthink, the conversation we’re having today – what are the signs of groupthink? How do you challenge groupthink? – if that was a requirement, I think that would go a long way, and perhaps further than regulation would, because that would influence human behaviour. And I agree with you, it’s very hard to codify that.

PL: Should we talk about diversity? I mean, it’s obviously key, diversity in all its forms, but I think it’s fair to say we have seen a lot of tokenism on this – lots of good efforts, lots of good intentions, some tokenism. How do you all feel that boards can genuinely achieve diversity of thought, not simply diversity in more obvious terms?

HM: Should we let Peter start here?

PVV: Clearly it’s been building up in me! Absolutely. I think this is something that we’ve been talking about and focusing on for so long. And of course, diversity in terms of having a good balance on your board in terms of male/female, that’s no longer a discussion point – everyone gets that. But you can have a really diverse-looking board, and they still all think the same. So how do you break through that? You know, if they all have the same kind of background, if they all have the same experience of the business, who is really going to challenge the consensus? So it is about getting those outsider views, and getting that more diverse board by getting people from outside the industry. And this is a real challenge, you know.

I did a bit of work with the Dutch corporate governance institute, and they really pushed through and did a really good job on almost getting 50:50 male/female boards. And the legislation was entitled at the time ‘Breaking down the old boys’ club’, which is a great sentiment and exactly about trying to break down this groupthink. But they now lament that they haven’t broken down the old boys’ club. Instead, they’ve created an old girls club to go alongside the old boys’ club, because it’s a small group of women who sit on almost 10 boards each, just about, and there’s no room for new to come through and to come up. I’m overstating it, clearly; it’s a bit more nuanced than that.

PL: But we have seen that in this country, too, haven’t we?

PVV: Yeah, exactly. And they’re thinking, well, why are there not opportunities? Why are you not getting, let’s say, a really good academic, or someone who really understands a particular consumer trend or demand, someone who’s really in touch with an aspect of your business that you probably won’t get from an insider. Why aren’t those sitting on the boards to provide challenge and insight, and think through some of the more difficult, strategic challenges that the board has to face? And I think that’s where there is that reluctance to say, “Well, no, we know the people that we like on the board because they kind of look like a bit like us, they think a bit like us, and it just makes our life a bit easier.” And I think you need to get beyond that. You need to get those people on who are going to occasionally make you feel uncomfortable.

PL: I want to hear what Kevin says to his clients about this, but before I do that, Helena, you set up the 30% club initiative, didn’t you, to get more female representation on board. When did you do that?

HM: It launched in 2010 but the idea was the year before. But that was deliberately born out of the financial crisis and trying to shake up the thinking in the boardroom.

PL: So honestly, would you say it’s been effective – that movement of getting more women into boards – or has this problem that Peter alluded to really stood in the way?

HM: No, I think we do have a problem still. You can argue that diversity is important for fairness and equal opportunity, which obviously I think is also important. But I don’t think it’s shaken up the thinking in the way that I had hoped or expected. And I actually don’t think that we know how to create the smartest-thinking boards at present. I think we’ve got various ideas. And I think a lot of people would suggest having age diversity. Obviously younger people who are digital natives will think about consumers, say, and how we consume everything – media, experiences, how we buy things, how we spend our time – very differently to even people 10 or 15 years older. And socioeconomic diversity – again, not one that’s really been focused on, but I don’t really think we know.

And so the diversity project, which I chair, has a single mission to try and improve diversity and inclusion, which is the important part of it in the investment industry, which is woefully behind on a number of metrics, just in terms of, you know, 12% female fund managers etc – it’s very low on the numbers demographically. But we’re just kicking off a project trying to really establish – we’re going to work with an academic institution and have been working on the briefing with a very diverse range of people, so it keeps taking a bit longer than I’d expect, and it’s improved by the number of people coming in saying, “Oh, Helena, you’ve forgotten about this. What about that?” And we are trying to do a couple of things. One is to ask is there a – and I hesitate to use the word formula, because it’s not going to be as simple as that – but is there a way to systematically make up a team more likely to perform better and to be less risk averse, less prone to groupthink? And then what can we do to actually put that in practice – so not just an academic exercise that sits on the shelf? But this, I think, would change hiring, would change promotions, would change chairing, and would change inclusion. Because I think a lot of women who’ve joined boards were like me – went into the room and thought, oh, to get on I have to behave in a certain way, and I mustn’t rock the boat – and that’s obviously what we wanted them to do.

PL: OK, Kevin, this is core business for you. How do you do it? What do you say to your clients?

KD: It’s a very interesting question. I just go back to Peter’s point about over-boarding; I do think that is a big issue now.

PL: People sitting on too many boards?

KD: Yes, too many boards, and because we’re ticking boxes, and when there’s this requirement to have been on boards before –

PL: The pool is small!

KD: St James’s Place was the first one, and I do find it actually quite healthy now that a lot of clients will not have the requirement of having been a NED before. Some of that’s driven by things like digital – so they say, “We need the voice of digital transformation on the board.” Now they know that those who are equipped to support in that tend to be a younger generation. They may not have reached the heights within the executive world yet that they would normally look to bring onto the board. So that’s forced them to accept they may not have been a non-executive director before. That’s enabled us to access a much bigger pool of women, for example, who are in their 40s. And I find that really quite healthy. I think most boards will now say, “Yes, we do want to bring in that challenge, but we’ve got a comfortable dynamic, and we don’t really want that upset.” So I don’t think we’re anywhere near where we need to ultimately get to.

And it’s exactly to your point, Helena; I think the tick box of diversity is fine, but it’s not inclusive. It doesn’t feel like a safe space. So you can have your opinion, but we really want to draw out of you. We want to encourage you to come. And I think the idea of the devil’s advocate is a really good one, that it’s your role in this board meeting to be the devil’s advocate. So come prepared to be the devil’s advocate. Chief executive, don’t feel threatened by devil’s advocate, because that’s what they’re here to be. Chair, don’t feel threatened; that’s what they’re here to be. Because we’re all naturally conflict–avoidant, but if you’ve got the hat on saying, “I am the creator of conflict. That’s my role in this board meeting,” then everybody understands it and knows that it’s safe.

PL: Peter, what do you think? The first question, I suppose, is how happy are you with the idea of inexperienced non-execs? And obviously there are pros and cons – diversity of experience, generational wins – and yet no experience. What do you think?

PVV: Yes, I think I’m in two minds about it. I think, on one level, it’s great to have an insight, but there’s also ways to get that without having them on the board. You can have a shadow board, or a youth council.

PL: Are they not easy to ignore?

PVV: Well, they are. They are. But I think it’s also that there’s the risk of, if you are struggling to contribute on topics that do require some level of experience, then you might feel quite quickly that you are being ignored in what you’re saying, because you might not understand the deep ins and outs of, let’s say, an audit or of the financial statements. And I think there has to be a baseline of understanding and knowledge. Now that is knowledge you can get trained on – there’s absolutely not necessarily a question that you need to be around for 30 years before you have that knowledge. That’s definitely not the case. But there is then an onus – if you do bring in younger people – there is an onus on those boards to make sure that they are upskilled quite quickly, so they don’t get passed by when conversations go into particular directions that they just haven’t got the experience or skills to contribute to. So I think there is then much more of an onus on the chair and the board to really make sure that they’re properly on board and that they are able to contribute at every conversation. And frankly, that goes for other board members as well. Not every board member is, perhaps, as comfortable with the ins and outs of particular discussions as they should be, and there is that onus about making sure you’re up to speed on those topics. So yes, I think I’m in two minds about it. I do think one has to be very careful that you are not creating, again, an environment and culture that people are being appointed to check, and it looks like you’re just ticking a box: let’s have a young person, because we need to have somebody smart on IT. Well, let’s just grab someone, put them on there, and it’ll look great.

PL: Yes, but it’s really self-evident when that happens, and it is kind of self-defeating.

PVV: Well, exactly. And I saw this first-hand. When Helena talks about the initiative she started – I reported into a PLC board in a previous role many moons ago, around that time, around 2010, and they got the message that they needed to get women on board. They already had a very prominent economist, a female economist, on board; fantastic. By the way. I’m not going to mention the company or the name, I’ll try and avoid that. But they added two more women on the board, and one was a senior HR manager at another PLC, and the other one had a similar type of role, but I think more from a marketing side. And when you look at the rest of the board compositions, these are all venture capitalists, ex-CEOs, and you’re just thinking, OK, the outside world is just going to think you have just appointed two people to tick a box, and they are not going to contribute anything to the board – and it was a fairly aggressively alpha-male type environment anyway. And you’re thinking, well, that has got to be the most uncomfortable way to get into becoming a NED if there ever was.

HM: And there were two of them at the same time!

KD: Exactly. And I think that does raise a point around diversity as well, around background and domain, because you’re seeing quite an alpha venture capital background. OK, so we take the gender out of that: you’ve got everyone who thinks the same way. They’ve come up the same way. It’s all about the numbers. I actually think the encouraging thing about that, whether it was successful or not, was that people were brought in with very, very different backgrounds, so they’re going to have different perspectives on things. You don’t all have to be experts on the numbers. You’re coming to be the voice of people. You’re here to be the voice of the consumer, of the market. And I think that’s where we really have to think about the diversity. It’s not just, “Let’s make sure we’ve got a lawyer on there. Let’s make sure we’ve got the accountant to run the audit committee.” There’s a whole lot of other perspectives that need to be brought to the board.

PL: Helena, when we talked about this the other day, you said that you’ve found that US boards were more robust. What is different?

HM: I sit on a US board – actually, I was in New York this week with them – and it is the most delightful experience. And I’m sorry to sound disloyal to my own country here, but we’ve come from different countries, we have completely different backgrounds. I mean, it’s a financial company, it’s a private company, but we are definitely very eclectic and our mix and our backgrounds, socioeconomically – age, perhaps less so, but there’s quite a spectrum still. And actually, I’ve never had any sense that anything’s off limits on this particular board. Now, obviously I can’t generalise on one [experience], but I have talked about this with a couple of other people who serve on boards in both countries, and they say yes, it is. There is a bit of a more risk-taking approach from the chair often.

One thing that hasn’t come up yet, but I wanted to share, is that I gave a talk the other day to – I think it’s called the Board Leadership Series, that KPMG runs – and I think this is for existing NEDs and people who might want to become a non-exec. They had done a survey – admittedly, of audit committee members, not chairs – and 81% of them had described themselves as risk-averse, I think it said risk-cautious, and only 19% as risk-takers. Now, of course, the biggest risk a board can take is not taking any risk at all – or a company. So this was something that we ended up discussing.

And my sense is here that we’ve got this sense of we’re going to check the boxes Kevin mentioned earlier, and I completely agree that larger companies are more prone to this. We’re going to have 1,000 pages on the ballpark, so we’ve covered every base, and we’re going to, you know, process it to death. Then you kind of end up with a bit of show-and-tell at the board discussion. Whereas in this particular board, we don’t have such long papers, actually, and there’s more time for reflection and discussion; at our dinner we always have a very provocative speaker and, you know, it’s very enjoyable. But also I learn, but also I feel I can give my completely honest view, and even if I’m an outlier of one – this is the acid test, really – it actually might prevail; that view might end up prevailing, because people stop and listen. So it’s not just being able to express a view that might be not the majority, but then have people probe it and come round and think, actually, maybe, maybe that’s right. Maybe we should change this.

PL: A proper forum. Conversely, you mentioned an experience you’d had recently of discussing a potential non-exec role, and it all seemed great right up to the point where it turned out they wanted someone – I think the word was more nondescript?

HM: I’m not obviously going to share the company name, but I was extremely disappointed, because I really enjoyed meeting the chief executive, and he had been the one that sought me out. And then we’d had seven rounds of interviews, which got my suspicions going really, because I thought if they’re not sure after six, you know, it’s like diminishing returns, surely, from meeting all these people. But I took it as good due diligence on both sides, but literally the feedback was that they’ve decided to go for someone more nondescript. And obviously that was the search firm’s words – it might not have been the exact words that the company had used; he was paraphrasing, I’m sure. But that was very depressing to me because, well, I thought I wouldn’t probably enjoy being on the board, but also we mustn’t have nondescript, professional board members who are afraid to say boo to a goose.

PL: Kevin, do you see this lot? Because I can imagine this is a familiar experience to you, where the board, you know, they’re talking the talk – they say, “Yeah, we want challenge. We want, you know, an open forum.” Then you bring them candidates who are going to give them that and they think, “Well, actually, I’m not sure we quite actually want that, really.”

KD: To be honest, that happens a lot with non-executive and executive and, you know, the profession has become much more consultative now than it would have been 25 years ago, when I started. And it’s incumbent on us to challenge the client as much as we possibly can, but ultimately it’s the client’s decision, and I do see it often where they say, “We do want someone who’s going to be that change agent, who’s going to challenge – but we do have a really good dynamic here.” Which is basically code for “but not too much”.

PL: So they try it on for size, but they don’t really want to do it.

KD: And then ultimately, they review the shortlist, and they go for the safe option.

PL: We need to wrap this up really, but I tell you what I do want to ask all of you: I’d like to know your thoughts, all of you, about how to tackle groupthink that is already embedded in a board. What would be your first step? Kevin, I’m going to ask you.

KD: The board effectiveness reviews, I think, when effective can really help to highlight it, you know; and then have the follow-up. But obviously it’s comply or explain, and it doesn’t have to be done more than once every three years, so that’s a long time. There’s a lot of things can happen in a three-year timeframe. So I think it has to be owned by the chair. I don’t think any outside influence can say, “You have to do this.” It has to be owned by the chair.

PL: Yes, because the chair just ended up being a bit of paper.

KD: The chair has to embrace it.

PL: Peter?

PVV: Yes, it’s a difficult one, isn’t it? I wrote a little paper on the Horizon scandal, on some of the lessons for boards. I don’t want to make a shameless plug here, but I was thinking about exactly that. So how does a board break out of that groupthink when things are going wrong and you really do need that external challenge? And of course, besides making sure that you have the right chair, if that diversity of thought wasn’t there to start off with, how are you going to get that diversity of thought with the same with the same people? And if you’re stuck in a bit of a rut, get some outside perspectives in, get some advisers in, set up a board of advisers, or bring in some new blood. Ultimately, you have to do something – anything – to break that cycle you’re in where you’ve hired similar people, and you might all get on like a house on fire, but that’s not the point of the board, is it?

PL: It’s just more of the same.

PVV: Yes, exactly, exactly.

PL: OK. Helena, your final brief thoughts?

HM: Yes, I tend to agree both Kevin and Peter on this, but I do think the fundamental problem is that the board that’s in the midst of groupthink is unlikely to recognise that in itself. And that clearly, unless it does, it’s not going to do anything about it. One thing that I’ve done recently on a board where I’m a chair of the nominations and governance committee is, with permission from the chair – this was really about establishing, did we need put in succession plans? Because a number of the people could be coming off – more from age than term limits. And so he said, fine, yes. I said, “I’m going to ask about effectiveness; we’ve done a proper effectiveness review last year, but I’ll just talk about the dynamic of the boardroom.” And this is a board which does not suffer, I don’t think, from groupthink – it’s that US company that I just mentioned. But actually having that as a standing question – you know, are we a victim of groupthink? Do we or have we fallen into groupthink? Trying to probe with each person, to actually think of an example where we’ve shown that we haven’t – actually putting it as a standing agenda item could be a good one, or it could be added to board effectiveness reviews as a very specific area where you’re looking for examples where you’ve demonstrated that you don’t have groupthink.

PL: That’s a really useful discussion. Thank you very much, everyone. Behind the Numbers will be back in late July. Before then, join us for a special post-election episode of Accountancy Insights, when we’ll be discussing the new government’s manifesto promises and what differences they might actually make to the UK economy. Finally, you will be delighted to know that listening to these podcasts counts towards your CPD requirement. So do log your listenership and submit it as part of your CPD record. A small tip for you, if you listen on the ICAEW website, rather than your app, you can just click the Add CPD tool on each individual episode page. Simple as that! Thanks for being with us.