Thin On Top by Bob Garratt (Nicholas Brealey 2003)

This book is published at a time when directors of many major British companies are complaining about the provisions of the Higgs Report. The main thrust of that report is to improve the quality and utilisation of non-executive directors, following logically from earlier reports (Cadbury, Greenbury and Hampel).

The negative reaction to the Higgs Report from directors of quoted companies is unsurprising and suggests that the main thrust of Higgs' proposals - to dilute the power of executive directors - has hit its mark. This reaction also reinforces the main theme of "Thin On Top" - that many directors are ill-equipped to direct their companies and are seeking comfort in their specialist management roles, rather than face the totally different challenge of being directors.

Bob Garratt makes a fundamentally important distinction between management or executive roles and those of directors. He challenges the distinction drawn between "executive" and "non-executive" directors. In a Board context there are only directors, some part time and others with an executive role in the company. All directors should be paid approximately equal fees for directing the company; those with executive roles should draw a salary as managers.

A Board structured along lines defined by Bob Garratt would be selected, trained and honed to direct the company - defining its purpose, values, strategy, risk profile and relationship with key stakeholders. It would leave the implementation of strategy and detailed management to specialist managers. Such a model would not only avoid interference from "executive directors" in routine management but would force them to fulfil their role as directors.

Bob Garratt emphasises the fiduciary role of directors. Too many directors are appointed because of their success as managers. The sense of reward too easily degenerates into greed and self-interest, whereas directors are expected to act primarily in the interest of their company. Recent scandals in the USA have underlined the degree to which boardroom incompetence has opened the door to excess and even criminality.

Having penned a strong and convincing indictment of board performance, Bob Garrett moves to offer a structured approach to selecting, inducting and developing directors. He writes in detail about the "learning board", focussing on the four key tasks of the board -

• Formulating policy and foresight

• Strategic thinking

• Supervising management

• Accountability

These key tasks are built into a dynamic model, with four cycles -

• Policy review cycle

• Strategy review cycle

• Operations review cycle

• Governance review cycle

which loop back to start again. Constant iteration drives new learning and better performance.

Bob Garratt has been involved from the beginning in the Institute of Directors' (IOD) development of its "chartered director" qualification. Members of the IOD come from companies of all sizes and have various patterns of education. The standards which are now required of company directors make it essential that their professional education should be consistent so that they can perform as a board to an ever more demanding level. Bob Garratt's three key values of accountability, probity and transparency are being demanded of company directors by a growing number of stakeholders. Increasing global competition and accelerating change are hampering the ability of companies to grow shareholder value. The days of amateurism and school playground games in the boardroom are past; the days of accountability, probity and transparency mean that only professional boards will be able to provide the leadership which enables their company to prosper.

"Thin On Top" is not only a timely "return to basics" in corporate governance but it provides clear guidance to chairmen on how to develop their board and to individual directors on how to contribute to its effective working. On the way the "Chief Executive" is brought down to size - technically he is not even on the board!

Adrian Davies - 21/4/03