Driving growth remains high on the corporate and political agenda. Fidelio is of the opinion that Board composition holds a key, if not the key, to achieving corporate growth. We were therefore pleased recently to co-host with FTI Consulting a seminar focussing on Board composition and growth in the TMT sector.
Gillian Karran-Cumberlege
The TMT Expert Panel Our panel comprised Thomas Geitner, former Management Board Member of Vodafone Plc and Executive Director at Henkel AG; Ross Graham, Non-Executive Director at Wolfson Microelectronics Plc and former Senior Independent Director at Psion Plc; Ken Olisa OBE,Chairman of Restoration Partners, Non-Executive Director of Thomson Reuters Corporation, former Non-Executive Director of Interregnum Plc and Open Text Corporation; and finally Katie Potts, Managing Director and Lead Fund Manager at Herald Investment Management. The debate was adeptly moderated by Dominic O’Connell, Business Editor of the Sunday Times.
Given their extensive Board and investment experience, our expert panellists were well equipped to analyse the link between growth and Board composition. For full details of the debate, please see https://www.fideliopartners.com/events.php. In this Edition of Overture Fidelio highlights our panellists’ very valid answers to the knotty question of how to achieve growth.
From my perspective the most important point is that (technology) non-execs matter; right from the beginning their quality can be a deciding factor as to whether I invest in a company or not.
– Katie Potts, Managing Director, Lead Fund Manager, Herald Investment Management
Generic Board Remit Our panel had a very clear understanding of the Board remit: to set, scrutinise and oversee the execution of business strategy, to ensure compliance with the necessary corporate governance regulations and to provide diversity of thought when making strategic decisions.
Characteristics of TMT Boards Above and beyond this, there are clearly some Board attributes more specific to the TMT sector. The Board of a technology company must, for example, have the experience, authority and judgement to hold executives to account during critical development projects. More generally the speed of change in the technology sector demands Boards that are able to keep pace with their decision making. Skilled investors are watchful for these characteristics.
NEDs and the Growth Agenda Fidelio was particularly struck with two observations which implicitly address the question – who do we want on the Board to drive growth?
NEDs and Access to Capital Firstly, our panel agreed that fast growing technology companies need access to equity capital and that this access is problematic for a number of reasons, including regulation and taxation, in the UK. Having accepted that there is a macro and structural problem here, Fidelio asks where are the bankers when you need them?
Our panel was sceptical of bankers and consultants on Boards with a clear preference for executives with a track record. Ken Olisa astutely pointed out, however, that given the evident need for consolidation in the sector, acquisitive companies could do well to include M&A skills at Board level. Fidelio takes this one step further. If access to equity is essential for the corporate growth trajectory, a banker skilled in introducing investment opportunities to diverse capital owners could be a very useful addition to the Board.
The next important thing for Boards is bringing on board people who are more familiar with those markets where we want to grow.
– Thomas Geitner, former Management Board Member Vodafone Plc, former Executive Director Henkel AG
NEDs and Access to New Markets Secondly, as the panel debated diversity on Boards, Thomas Geitner posited the challenge of building Boards for new markets. High growth markets in Asia for example are often profoundly different from Europe and the US. Thomas made the case for Directors with a deep understanding of target high growth markets joining the Board. This also enables the Board to look beyond the short term and “to set the agenda for the next 20 to 30 years.”
New markets may be geographical but could also be demographic, for example. This discussion falls neatly under the diversity debate because it is almost certain that Directors bringing sharp new insights into target markets – geographic or otherwise – will inevitably have different profiles.
Fidelio is therefore very happy to answer the question – who should we have on the Board to drive growth? If access to capital is an obstacle to growth, then consider an experienced financier as an addition to the Board. And if bold moves into very different target markets are on the agenda, why not include deep experience of that target market on the Board? Simple questions deserve simple answers.
Coming Up…
Overture explores how talent drives valuation. Future editions of Overture will deal with
• Building leadership teams for new markets
• Unlearning CEO behaviours
• De-risking the hiring process
• Communications in China – the talent bottle neck
• Articulating the value of the IR profession
Please contact us with comments or for more information on Fidelio Partners on info@fideliopartners.com