Post Woodford both regulators and consumers are pushing for more clarity around the actions and behaviours of authorised corporate directors and the relationship between individual funds and fund platforms. The debate about the desirability and effectiveness of ACDs external to fund management companies (think Link and Woodword) compared to internal ACDs (think the majority of the fund industry in the UK) may have some way to run. As regards ACDs within fund management houses, the current mood music suggests that the concern and pressure for Chairs on fund boards to be Non-Executive is growing, in line with the fact that the PRA frowns on Executive Chairs for banks, building societies and insurance companies. Behavioural change, independent governance and the consumer (remember them?) are leaning heavily on the door of the asset management industry as never before. Board members, Chief Executives and the senior leaders of these companies need to be ready for a new set of challenges and a different dialogue.
As a specialist in recruiting Chair and Non-Executive Directors onto Boards in both the private and public sectors, it is fascinating to see the tensions that exist between human behaviour and the big stick of regulation. How is this elusive quality of independence measured, attained and communicated? Board dashboards and training courses are useful and very much needed and regulation lays down the tramlines of governance. In my experience, however, the magic of the greatest and most successful Chair and Non-Executive Directors I know lies in their ability to talk in direct and simple terms about the most complex of issues. The other magic qualities (that are often elusive around the Board table) are that of restraint, patience and availability coupled with a genuine commitment to the right outcomes not only for shareholders but also for the consumers and communities the company serves.
Only by modelling and promoting these behaviours will the asset management industry move towards sustainable change and authentic independent leadership. Another key lever in moving towards the state of Board independence will necessitate the asset management industry embracing Non-Executive professionals from sectors – gasp – outside financial services. Diversity of thought and life experience is a proven commercial accelerator and enables businesses to create better outcomes for their customers; it seems logical then for asset managers to do the work and attract and retain this inclusion of talent at Board level.