With the global economy in recession as a result of Covid-19, Big Business has the crumb of comfort that unlike in past downturns, this time it is not to blame. Nevertheless, customers, governments, the media and society at large are still carefully scrutinising every action of large companies and passing judgement on whether they are doing ‘the right thing’.
Step in our Big Business Defenders – the Head of Internal Audit, Company Secretary and Reward Director – three executive roles in UK PLCs which interface extensively with the Board and are deep areas of expertise for Hedley May.
The exercising of astute judgement is the differentiating feature Hedley May looks for in identifying best in class functional leaders. As the crisis unfolds, these three executives will be at the heart of many key decisions, with their judgement being tested under the most extreme circumstances.
Already we have seen the issue of executive pay loom large with executive teams taking pay cuts and foregoing bonuses, with decisions on LTIPs still to come. For audit, and future risk management and assurance, key decisions are being taken on which audits to prioritise, in a world where they are done from the desktop rather than on the ground. For the Company Secretary, their role in facilitating a board to function effectively, virtually, and also making appropriate decisions around disclosures, has never been more prized.
As the economic gloom deepens, many more critical decisions balancing commercial imperatives with stakeholders’ expectations will be required. Out of every downturn there are winners and losers – high quality individuals in these roles add significant value and will play a central role in determining how well their organisation emerges out of this.
In this article we analyse the market for this talent with the following key findings:
|Head of Internal Audit|
2019 saw the FTSE100 appoint twice the number of Heads of Internal Audit compared to 2018, with 12 appointments. This active market is likely to continue as boards place increasing emphasis on assurance and risk management in a Covid and post Covid world.
Paucity of talent across the FTSE 350 Head of Internal Audit functions requires companies to consider talent beyond the FTSE or internal succession options:
• 50% of FTSE 100 external appointments in 2018 and 2019 came from outside the FTSE – 3 from outside UK PLCs and 1 from the Big 4.
• 56% of FTSE 100 appointments in 2018 and 2019 went internal. Internal appointments were most common in financial services companies, which due to their scale have, still not perfect but, slightly stronger internal succession pipelines.
Issues of executive compensation never quite got out of the headlines and this crisis has brought them to the fore again. This market will continue to be very competitive. The imbalance between demand for Reward Directors and supply meant that these searches were amongst the most complicated and typically open for the longest. This is a trend which will be accentuated in a Covid environment.
The challenge is compounded by many of the ‘big name’ Reward Directors heading towards retirement. This is hitting the market now and so identifying the next generation of stars is not easy but has become an imperative. Searching broadly for talent will be key.
High quality Company Secretaries will be prized, and lower performers are likely to struggle to operate at the level the crisis requires.
The market has not been as active as reward and internal audit.
Standalone Company Secretaries numbers are decreasing.
Companies turning to General Counsel to play a ‘double-hatted’ role, encompassing the Company Secretary remit. The number of standalone Company Secretaries decreasing has been driven by the limited pool of Company Secretaries with the requisite leadership skills to perform the role. In a Covid environment, the pressure on those ‘double-hatting’ will be intense. It may spark a debate about splitting the role but in the end the paucity of strong standalone Company Secretaries means the status quo will probably prevail.