The CIPD report The value of people expertise on corporate boards finds that only a quarter of FTSE 350 firms have a board member (both executive and non-executive) with an HR background, while only 2% have an HR director as an executive board member.
The research also highlights low HR representation on remuneration committees (23%) and nomination committees (20%), despite both these being focused on the key people issues of reward and talent.
This is despite growing expectations and need for competence around people issues to help with challenges such as tackling skills gaps and shortages, attracting and retaining a more diverse workforce, and supporting mental health at work. Recent high profile corporate scandals have shown that issues such as sexual harassment can lead to existential challenges for organisations if not identified and managed effectively.
The ‘people insight’ deficit on boards also means that many organisations fail to fully recognise the value creation potential of their workforces, reflected by falling levels of investment in workforce training and disappointing levels of productivity growth in the UK.
The research provides further evidence as to why it is critical that boards have the ability and appetite to engage with and have a good understanding of the many complex people challenges faced by businesses. The report says a lack of effective HR representation undermines firms’ corporate governance, particularly since most questions on board effectiveness from the Financial Reporting Council concern people issues.
Chief people officers interviewed as part of the research noted some common problems or knowledge gaps among non-HR board members, including:
- a lack of in-depth understanding of people issues
- overfocus on the financial skillsets
- over-enthusiastic on employee engagement, leading to interference with management
- a lack of emotional intelligence
- discomfort and a lack of awareness around EDI issues.
We will be flagging key findings from the report in our response to the FRC’s consultation on the UK Corporate Governance Code. We believe there is a strong case for some key refinements to the code and accompanying guidance to signal to boards the need for greater input, support, and advice from senior-level HR practitioners on critical workforce issues.
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About the author
Susannah Haan, Senior Corporate Governance Adviser
Susannah is the Senior Corporate Governance Adviser at the CIPD, having worked for companies, investors and regulators to influence public policy and create long-term change, improving corporate and investor reporting and accountability to company shareholders and investor clients.
She originally developed an interest in the area when working with company chairmen at the CBI on the Higgs Review of the role and responsibilities of non-executive directors.
She has worked in London, Moscow and Brussels. Previous roles include: board member at PWN Global, business angel at Rising Tide Europe, Secretary General at EuropeanIssuers, Adviser to the Financial Reporting Council on the introduction of the Stewardship Code for institutional investors, Associate Director of Public Policy at Fidelity International, Senior Legal Adviser at Clifford Chance and Lawyer at Clifford Chance.
She is also a Trustee of the CBI Retirement Fund and Advisory Board member to PWI Brussels.
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