This Q&A with Peter Cornell, the former Managing Partner of Clifford Chance, first appeared in Ogier's "Any Other Business" briefing for Channel Island NEDs.
- How did your NED experience begin? How has your perspective changed from being in legal practice to your current roles?
I have had NED roles for a number of years now, and I am a founding partner at Metric Capital Partners, a special situations fund aimed at the European mid-market. I sit on the board of a number of our portfolio businesses. In addition, I have current board experience of UK listed entities, financial institutions, professional services firms and academic institutions.
Since I have been living in the Channel Islands, I have been approached fairly regularly with opportunities to join boards as a NED. Although I try to be fairly selective, I think it is good to have the variety that I have, seeing so many different types of businesses.
What is clear from my experience is that a good board has the same attributes, whatever the kind of business, whether it's selling widgets in Eastern Europe or professional services in the UK. I have seen boards operate across different sectors and on different scales, including where there are varying degrees of regulation. What is very apparent is that all boards need balance, and NEDs play a key role in achieving that.
- How has the role of a NED changed in the last few years?
The biggest change is dealing with increasing regulation, whether in the Channel Islands or in the UK; not just the greater volume of regulation, but also the greater complexity of it. In terms of keeping abreast of developments, you normally find that companies have auditors and lawyers who are very forward-thinking – running specific courses for NEDs, or for a NED in particular. You have access to a lot of information, but the difficulty is finding the time to assimilate it and ensuring you focus on the legislation that affects your organisation and your skillset.
- What skills would you look for in a NED today?
It would depend on the company and what it is doing, and also on the skillset that you have already got around the table. But if you park all of that for a moment, fundamentally, you will be looking for someone with experience, whether that experience is based on industry, finance or professional experience. Essentially, you are looking for someone who has been out there and done it for a while.
In terms of personality you need someone who can work well with others, someone who is a good listener, and someone who is instinctively supportive. There is a lot of talk about being challenging, but in my experience it is also about inquiry and understanding. There are also organisations that open themselves up to taking on NEDs although there is no formal requirement for them to do so. Any organisation that does that – either through the appointment of a NED or a management level advisor - demonstrates both confidence and also a willingness to listen and to be challenged.
- You've lived and worked in London, Singapore, Madrid and New York – now you're based in Guernsey: are things different for NEDs offshore?
People in offshore jurisdictions may be exposed to more opportunities but otherwise there are very few differences. The regulatory element is the same – the precise terms of the regulation may not be replicated, but the thrust and effect of it will be the same. However, a key difference here, and one in favour of the Channel Islands, is that the regulators are accessible. That is an advantage. You can speak to them, you can have a dialogue, there is an exchange of views. It is a real positive. I am not saying that regulators elsewhere are completely inaccessible, but there is a difference.
- What level of technical knowledge do NEDs really need?
If you go around the table, one of the requirements is clearly for someone with finance skills, whether that is someone who has been in banking or who is a qualified accountant. You also need people with broad business skills. For example, a lawyer, in the right circumstances, can bring just the right insight; the fact that their legal experience may not be in the particular sector in which the company operates does not actually always matter. Beyond that, you need people with relevant industry experience, and expertise in management and strategy. It is important to consider not just the current stage of development and maturity of the company, but also to look ahead to what is needed for the next stage.
One of the real changes of the last few years has been that IT/cyber issues – particularly as they relate to risk – are now discussed at board level. Increasingly, it is an area where, as a NED, you are making inquiries as to whether a company feels it is properly resourced, and about what it is doing, to meet the challenges in this area. That means that you need someone with relevant expertise at the table, whether it is a company executive, a tech-skilled NED, or a consultant. I don't think this person necessarily has to be a NED, but when IT/cyber issues are particularly relevant to a company's activities, it may be appropriate to have a NED with some background in that area.
- How do you resolve disputes at board level? To what extent is this a role for NEDs?
In my experience, there is not too much violent disagreement at a formal board meeting. You would hope that the chairman or chairwoman will have seen an issue coming and taken steps ahead of time to ensure that any tension can be resolved. It is very rare, in my experience, to resort to a vote or to a show of hands. If there is a difference of opinion the chair would normally act to take the issue off the table, to think about it separately, and to move on. Board meetings should not get stuck at an impasse.
- How important is diversity – in terms of age, race, gender and background – on boards?
If there is a new board seat that comes up, the search has got to start very wide, looking at people of all ages, races, gender and background. From there, you pick the person with the most relevant experience. In terms of age in particular, being young or old should not be a barrier. Having cast the net as widely as possible, it is then a question of narrowing down the candidates to identify the individual who best fits the needs of the organisation. Younger people can bring more of an entrepreneurial skillset, better IT skills or a greater willingness to question things than might have been the case amongst the older generation, and all of that is good. At the other end of the spectrum, people at the end of their careers will carry more experience, and the judgement that comes from that experience can be very helpful when a company finds itself in new territories or in choppy waters.
Above all, balance is key. Five individuals of a similar age with a background in finance, no matter how good they are, are not going to give you that balance. You also need to consider balance in terms of personalities, because you need a board that is comfortable speaking with each other and listening to each other's points of view. If you have people coming fresh from chief executive roles, they may be used to making decisions alone, but that is not the role of the NED. You need to ensure that there is a healthy dynamic between NEDs and management, and amongst board members.
- What should NEDs consider before taking up an appointment? What should they do by way of research?
The critical question, and this should be foremost in their minds, should be whether they can afford the time to take on the role. They need to think seriously about that. They do not necessarily need to know the business or the sector back-to-front, but they do need to be interested in the area. It may not necessarily be from the get-go that they will be able – or feel able – to make contributions, but they should know they will be able to do so in time, whether in a specific or general way.
Someone thinking about taking a NED position should meet the other board members to get a feel for their strengths, and other key executives, not necessarily all at board level. They also need to understand the financial position of the company, its recent past performance and its strategy, thinking not just about the current state of the company but also about its future.
- What are some current topics that NEDs should be thinking about?
Fundamentally, the focus should be on strategy, performance, risk and people. Those are the four ever-present issues that should be on a NED's agenda.
To those I would now specifically add cyber security risk, which has become a strategic issue and a subject for discussion at board level, and reputation. Reputation generally has always been an issue, but in today's world a company can find its reputation tarnished so quickly, and that can very soon affect the bottom line.