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RON SANDLER URGES REDUCED EXPECTATIONS OF CORPORATE GOVERNANCE
25 June 2010
25 June 2010: Ron Sandler, IFT Honorary Fellow and Chairman of Northern Rock, delivered the annual lecture at the Institute for Turnaround last night, calling for more realistic expectations about the ability of Boards to prevent corporate failure.
He said:
"Boards exist fundamentally to challenge managements, to hold them to account and, in extremis, to replace them when things go badly wrong. It is naive to think that a board dominated in number by independent non-executives can play a lead role in such matters as setting corporate strategy or defining risk appetite.
"We are too keen to blame our boards when things go wrong - to the point that we are depriving our boardrooms of talent and creating a formulaic approach to corporate governance that ultimately serves no stakeholders well"
He also argued that, in times of stress, boards need to find a different rhythm and must resist the temptation to place excessive demands upon management, saying:
"You don't want to be in a car in which a group of back seat passengers, most of whom do not possess (or perhaps have never possessed) a valid driving license and have only rudimentary knowledge of the particular road with all its twists and turns, are fighting with the driver to get their hands on the wheel and their feet on the brakes.
"Just as in times of war, the back-room generals give way to their field commanders, so in times of crisis boards must step back and trust the CEO and his management team to take charge and make the right decisions."
He added that this temporary stepping-back by the non-executives needs to be accompanied by close attention from the chairman:
"It is in times of crisis that the chairman really earns his corn. He occupies a middle ground between the non-executives and the management team, and this makes him ideally placed to push back on his non-executive colleagues and create the space necessary for the executive effort, whilst at the same time, being in a position to offer guidance and counsel to his CEO."
Christine Elliott, Chief Executive & Director at the Institute for Turnaround said:
"At times of crisis, Boards need less noise and more insight so they can concentrate on stabilising and re-focusing the business. Ron has developed a sophisticated thesis, based in his experience, about how executive and non-executive directors could and should react when the business is experiencing extreme difficulties.
Since the recession there has been an intensified focus on governance in business, specifically to what extent failures of governance have contributed to, or even caused the turbulence of recent years. Good governance is crucial but as Ron said, in times of crisis, normal rhythms cannot be maintained.
Our accredited turnaround professionals are parachuted into companies to bring uncertain situations under control, whilst restoring and strengthening the bonds of trust between Board members, giving them the confidence to move forward."
The Institute for Turnaround's Annual Lecture took place Thursday 24th June in
Notes to Editors:
Ron Sandler CBE is Chairman of Northern Rock, Phoenix Group, Paternoster and Ironshore, and an advisor to Palamon Capital Partners. He served as the Chief Operating Officer of NatWest Group and before that; he was Chief Executive of Lloyd's of
The Institute for Turnaround (IFT) is the leading professional body in
It is a nonprofit making company limited by guarantee. It was established in late autumn 2000, supported and encouraged by government, the clearing banks and other financiers, private equity investors and leading accountancy firms.
For more information please visit:
http://www.instituteforturnaround.com/default.asp
For further information, please call Natalie Bateman or Surinder Gill on 0207 618 9197 or ift@luther.co.uk.