Egon Zehnder
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We gathered thirteen SID leaders to discuss the role of the SID and how it's evolved since its inception sixteen years ago. Below are key highlights from the discussion:

When does the role come into its own?

  1. During times of crisis and emergency

  2. When difficult messages need to be delivered to the chair and in conveying feedback to the chair

  3. In bringing the NEDs together

  4. In amplifying the voice of the chair, but equally, holding the chair to account

  5. In helping the flow of communication

  6. In acting as the relief valve, internally and externally

  7. The art of aligning and translating all the internal messages; the SID must be abreast of all of this

  8. When the relationship between the CEO and Chair has broken down

  9. The SID role is about listening, observing and facilitating outside of meetings

Are there merits to combining the SID role with the committee chair roles?

In general, the group agreed that it is not optimal to have the SID also being one of the committee chairs. On larger boards, it can be good to form a four-person quartet to enhance decision making (comprised of Chair, SID and the two committee chairs). But there are risks with this approach, with the possibility that some of the directors may feel ostracised, risking creating a quasi two-tier board system.

What are some of the challenges of the role?

It is an undervalued and underpaid role. It requires sophisticated emotional intelligence; you’ve got to know what to engage with and when. The SID role is a leadership role, but it is also a followership role. He or she must be comfortable leading from behind. Although there is often not a lot to do, the quiet times are important for building good relationships with all board members and the executive team so that the board can mobilize quickly in times of duress.
 

The SID role is about listening, observing and facilitating outside of meetings.

Chair succession, the process

Should the SID aspire to be chair? The group largely agreed that it is much better if the SID does not aspire to be chair. It can be very damaging if the SID does not declare an interest in the chair role, in spite of wanting it, so the SID must be transparent in these circumstances. The 9-year rule, whilst initially being disruptive, has helped with chair succession in the longer term.

  • During Chair succession, the SID has to determine the timing of when the chair goes. It is very important that the previous chair is excluded from the chair succession process. It is also important to involve the CEO, one meeting is not enough. In some companies, particularly larger ones, the CEO should be allowed to veto potential chair candidates Make sure from the outset who is in the process

  • Make sure the process is quick, the moment you launch it, it can destabilize an organization, so time is of the essence. Speed of decision making around the board table is critical, you can wait for the right candidate but very lengthy deliberation is not helpful

  • My bias is to involve the whole board. When everyone feels involved, decisions are easier

  • If the chair is not going within the accepted timescales, it is important to announce an end date and give context. Why is he or she staying on? When will they go?

The Soft Skills (and Board Effectiveness Reviews)

It is important to check in with people even if there are no obvious issues. It is easy to think, ‘I’m busy’, but it is critical to take the time to examine the nuances of a situation. What are people not telling you? We discussed how to explore what’s happening under the bonnet, particularly if there is a strong chair at the helm. Several guests agreed that using the Board Effectiveness Review (BER) Report as a starting point, is a good way to trigger this discussion. A questionnaire in a BER is generally inadequate, the real value comes from in-depth interviewing of the board directors.

People underestimate the power of engagement and picking up the phone to shareholders. But discretion is key, the outside world cannot know of any challenges, as corporate reputation is critical.

Reviewing the Chair

An important part of the SID role is to conduct the annual review of the Chair. This can occasionally be challenging, but it is important that the Chair hears all the key messages

Engaging with shareholders

The SID should be available for shareholders to speak to if they have some concerns and need a second channel. SIDS need to be proactive in reaching out to key shareholders to before there is any crisis, the onus should not necessarily be on shareholders to make contact first

What have we learned?

In general, the role has been additive and the group is happy that the role was conceived by Higgs, sixteen years ago. Regulation may bring the role to greater prominence.

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