“There Is A Need For Board Members Accustomed To Questioning Strategic Plans”

Spain board directorsAna García Fau is a board member at Gestamp, Merlin, Globalvia and Renovalia in Spain.

Fernando Rodríguez | Ana García Fau is a board member at Gestamp, Merlin, Globalvia and Renovalia in Spain. In addition, she also serves on the boards of French firms Technicolor and Eutelsat and the UK company DLA Piper. As a member of these boards she carries out specific tasks on the respective auditing committees. Previously she worked for 20 years in McKinsey, Wolf Ollins, Goldman Sachs and the Telefónica group.

Q: The UK Financial Reporting Council (FRC) is putting emphasis on companies providing more information about their business model and their actions with respect to reinforcing the corporate culture. What do you think of this trend?

A: Boards talk increasingly more about issues such as culture and values, although not to the same extent in all of them. For example, in DLA Piper corporate culture is regarded as very important. It’s a company which is based on the acquisition and management of talent – lawyers are its main asset – and an attractive, differentiated corporate culture, above all authentic, which contributes to attracting the best talent.

Q: The size of boards has been decreasing. In the Ibex-35, the number of board members has fallen from 550 to less than 400 over  the last decade. Now the average is between 10 and 12 members in Spain. What is the ideal number and why?

A: It’s true that there is a trend towards smaller boards. But more than the number, what’s relevant for me is the composition, the profile of its members and what each one contributes. The board is a work team which takes key decisions and administers the company. It doesn’t get involved in the day-to-day, but in the global aspect. It’s important that it’s made up of the different profiles needed to carry out its job correctly: profiles with financial, technological, business knowledge…There is a trend towards there being a majority of independent board members on the different committees, which means there has to be a sufficient number of them on the board. In my experience, in the case of a big, listed company, a board of between 10 and 15 members, with the majority being independent both on the board and on its various committees, is manageable.

Q: With regard to the profile of the board, a report from PwC in the US reveals that 40% are critical about the formation of their colleagues and that disagreements have increased in the last few years. What is the right mix of experiences needed on boards: financial, operational, international, regulatory…?

A: I don’t know whether it would be the same in Spain or in Europe. My experience is that board members are very qualified. Each one makes the best contribution he/she can based on experience, knowledge etc. The selection of the board member’s profile is very important. Not all members are expected to contribute in the same way on every issue. The important thing is that the board as a whole can debate all the manangement issues which come up and are diligent about taking the right decisions.

Q: Should there be a map of board skills? 

A: There are various types of skills necessary on the majority of boards, which are very much related to the issues themselves on the board’s agenda. For example, financial-accounting and risk analysis skills are key. Secondly, there are increasingly more relevant skills related to establishing policies and remuneration plans for management – and board members. These must also be linked to meeting strategic objectives and aligned with shareholder returns. Thirdly, in those matters related to strategy, what is needed is not so much experts but more board members who are capable of questioning strategic plans, analysing the competitive or regulatory environment, as well as deals, investments, fiscal policies…Whatsmore, the job of any board member is to ensure the company creates value and not just on the short-term, but in a sustained manner in the long-term. To do that, management has to be supervised. Above all from a point of view of debate, questioning and supervision. All those technological and digital issues, and how they affect the business are also very relevant: the disruptive elements in the business model should be known and talked about. As an example, in the automotive business, issues like the electric car and aspects of connectivity, and sharing vehicles…In real estate, in offices, importance must be place on new trends like coworking…Considering technology as an opportunity or a risk is a matter which is constantly present on the all the boards where I serve.

Q: In Spain, only one out of every eight board members are foreign. In France or the UK, one out of every three…Why is that the case here? 

A: There are a lot of issues here. The first one is the extent of internationalisation. If companies operate in very different geographical areas, it’s very important to have representatives from each of them. Having board members who have experience of different environments, geographical or business, help the board to function better. On the boards in Spain where I am a member there is this international presence and there are members of different nationalities. But on a board of directors more importance shoud be placed on expertise than on nationality. An international board, with different profiles and ages, training, experience…This is what makes for better boards.

Q: The financial crisis has shown that boards have abandoned their functions on quite a few occasions. What do you think of this?

A: I think there is a growing tendency on boards towards professionalization.  In many cases due to the increasing regulation and legislation being applied to the function. Because it’s the area which is more familiar to me, I would like to highlight the functions and skills which today are attributed to auditing committees and, particularly, to the regulation on the quality and the quantity of financial information which is offered to the market, for which this committee is responsable. And fiscal policy. You can also see a growing implication on the part of the board towards identifying and controlling every kind of risk which affect the company. From macro and geopolitical risks to those more inherent to the business itself…