HR’s role in governance: A chairman’s view
Having an HR director who encourages a culture of empowerment, rather than worrying about being on the board, is very important
In my experience as a chair of FTSE100 companies, I have always worked pretty closely with the HR director. I would always go see the HR director as succession planning was always a pretty big part of the agenda, and they realise that getting the right management structure is really important. [Good HRDs] have got ‘beyond HR’ and are much more strategic, looking at the leadership, people and skillsets you need over the next five to 10 years. For example, at The Edrington Group we are looking at digital skills.
However, at all the boards I’ve been on, we haven’t had an HR director there. That’s because boards are tending to get smaller on the executive side and it’s unusual to have a lot of executive directors around it. It’s not a skills issue, it’s about the functionality of the board. Don’t worry about being on the board. With all the functional skills there are now, if everyone was on the board, the board would be too big. Besides, sitting on a board brings so much broad responsibility, why would an HRD want all that when they get equally good access? At Petrofrac, [then group HRD] Geoff Tranfield had a dotted line to me; he knew what I was thinking and vice versa.
It’s all about people. You can have a great governance structure, but if you have the wrong people, you will fail. I chair the ethics board and it’s about making sure everyone can say what they are thinking, wherever they are in the organisation. Sometimes you will have ethical dilemmas, and I’ve always encouraged people to speak up. When they don’t, I worry. You need to encourage it from the top. Having an HR director who encourages that culture of empowerment is very important.
HRDs can do lots on remuneration because it is getting out of hand. A lot of the investment groups are worried about the power of [remuneration] consultants. HRDs can pull things back to schemes that are sensible and more fit for purpose. As a chair, I want something investors want to vote for. Institutional investors don’t want to see a consultant in these meetings. If I can take the HRD to talk about what we are planning and why, that would be better. I would put the onus on the HR director to step up and just do it – talk to the chair and talk to the RemCo chair.
Norman Murray is former chairman of FTSE100 oil company Petrofac and current chairman of premium spirits company The Edrington Group. He is also a School for CEOs faculty member