Phase two – Main study

3.3.2.1 Pilot findings that influenced main study design.

The pilot study explored the appointment process from the perspectives of the three main stakeholders in the appointment of a NED. Namely: the Chairman, the ESF and the appointed NED. Interview data were analysed from: three Chairmen, three ESFs, and three NEDs. Each of the NEDS had gained their first NED appointment with a FTSE 100 company in the last 12 months. The Chairmen and ESF members that were interviewed were asked to identify an appointment they had made in the last 12 months and base the interview on these NED appointments. From this analysis a holistic picture of the appointment process for a first-time NED to a FTSE 100 company emerged. The conclusion of the pilot study was that credentials were necessary as threshold criteria. However, to gain a NED appointment an individual needed reputational capital and this capital would have been vetted in the networks of the corporate elite and the interviewing process by the Chairman. In the main study, the researcher needed to gain more data on the appointment process to build up a more fine-grained analysis of the appointment process and the reputational capital needed to secure a first-time NED to a FTSE 100 company.

On the basis of the pilot research, the researcher decided to refine the population for the main study to improve access and validity. The interviews of the Chairmen and the NEDs provided data on the process that told a very similar story and were equally rich in detail. Therefore, the researcher decided to interview NEDs in the main study as their accounts were proving to be detailed and rich. For the NEDs, their first appointment was a big personal accolade in their lives and they tended to want to talk about it in depth and share information freely and accurately due to the recentness of the appointment. Further, NEDs were easier to access than Chairmen.

The researcher also learnt from the pilot study that the process of ‘fit’ was a salient factor in the appointment process. In order to ensure the researcher got rich data from

all interviewees on this process, the probing questions were retained in the interview protocol to encourage all interviewees to explore this part of the process (see amended interview protocol in Appendix C).

3.3.2.2 Sample for main study

I planned to interview a further 12 NEDs for the main study. Using the database BoardEx and board data from corporate websites, a list of the NED appointments made to FTSE 100 companies in the period July 2010 to July 2011, was drawn up. This period was 12 months before the researcher’s interviews took place with the NEDs to ensure experiences were still fresh and easily remembered. This list of 162 NED appointments was reduced to 43 first-time appointments to FTSE100 companies.

Contact was made with all 43 NEDs by letter of invitation using the researcher’s institutional connections with Cranfield University. An initial response from two NEDs secured two interviews and a number of personal recommendations and referrals securing a further five interviews. The remaining five interviews were secured through extensive follow-up emails and phone calls on the original invitations. The three NEDs who had been interviewed for the pilot study were considered part of the final sample data as all NEDs had been asked the same interview questions. The data was considered valid for analysis in the main study. This gave the researcher a total sample of 15 NEDs for the main study, which was considered a reasonable sample from this elite group of directors. Sample demographics detailed in Table 3.2.

Table 3.2 Demographic characteristics of NED sample

Age Gender Nationality

Sector of NED appointment

Mean = 52. range = 43-60 7 men and 8 women

10 British, 3 American and 2 Dutch Automotive, retail, property, financial services, brewing, utilities,

pharmaceutical, mining, construction, aerospace and energy.

3.3.2.3 Data Collection

As this is an exploratory qualitative study, semi-structured interviews were chosen as the most appropriate method for data collection. Use of the interview protocol enabled the researcher to maintain consistency with each interviewee, whilst allowing sufficient breadth for the NEDs to explore the whole range of factors, which had relevance in their appointment process. The interview protocol, which was used in the pilot, was based on three questions:

1. How did your NED appointment to a FTSE 100 company come about for you?

2. Who was involved in the process?

3. a) What were the criteria for selection?

b) Why do you think you were appointed?

Each question had sub questions for probing in the interview (interview protocol in Appendix C). The researcher adopted a minimalist approach in following the interview protocol with one or two questions being asked under each theme and probing with further questions only if the information was not fully flowing from the interviewee.

Personal reflection by the interviewee was encouraged, in order to obtain context rich data. 13 interviews were conducted face to face in the NED’s offices. Two interviews were carried out on the phone. Face to face and telephone interviews lasted between 40-60 minutes. All interviews were digitally recorded and professionally transcribed resulting in 34-38 pages of interview data. Interviews were the principle method of data collection, supported by demographic details of NEDs from the database BoardEX and corporate websites. A ‘Contact Summary Sheet’ was completed after each interview (Appendix A).

3.3.2.4 Impact of changes in corporate governance guidelines

It became apparent in the researcher’s interview schedule that women were responding in greater numbers and more quickly to my request for an interview on their appointment. As the researcher wanted a balanced sample of men and women, she adopted a much more persistent follow up procedure with the male appointments, in order to secure seven interviews with male NEDs. The data collection took place during the period March 2010 to January 2012. In June 2010, the revised UK Corporate

Governance Code (2010: 13) came into effect. It included for the first-time a principle recognising the value of diversity in the boardroom stating that:

The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender.

During this time the incoming UK Government also made a pledge in the Coalition Government Agreement (2010) to:

Look to promote gender equality on the boards of listed companies.

Following this, Edward Davey the Business Minister, and Lynne Featherstone the Minister for Women, invited Lord Davies of Abersoch to undertake a review of gender diversity on boards. This review was to identify the barriers preventing more women reaching the boardroom and to make recommendations regarding what government and business could do to increase the proportion of women on corporate boards. In September 2010, Lord Davies began consulting with a range of stakeholders among them senior business figures and women business leaders. Lord Davies’ independent review into female representation on UK corporate boards was published in February 2011.

The review recommended that FTSE 100 companies should aim for a minimum of 25%

women board members by 2015 and quoted companies should disclose annually the proportion of women on their boards. He also recommended that the UK Corporate Governance Code should be amended by the FRC to require listed companies to establish a policy concerning boardroom diversity, on which the FRC started consulting with business leaders in 2011.

Chairmen of FTSE 100 companies were required to announce their aspirational targets by September 2011. In 2012 Lord Davies’ annual monitoring report demonstrated an unprecedented pace of change in the boardrooms of UK PLCs. In the period 2011-2012 the biggest-ever reported increase in the percentage of women on boards was recorded. Further, during this time the European Commission also debated what measures might be taken to bring about gender parity within boardrooms and discussed setting a quota for women on boards across Europe, with legally binding penalties.

During the period of this study’s data collection, Chairmen were under political pressure to ensure that more women were appointed to boards. This had several impacts on the data collection. During the researcher’s quest for NED interviews, women responded to her invitation much more quickly than men and in greater numbers. In order to achieve a balanced sample the researcher actively and persistently had to pursue male candidates for a much longer period of time in order to secure interviews with seven men. In addition, many male candidates were negative in their interview about the NED process and the public debate and focus on increasing female representation on boards. They expressed a view that during the period 2011-2012, men were finding it more difficult than women to obtain interviews for NED positions. Further, the researcher found it particularly challenging to focus the male interviewees on the main points of the interview, as many of them drifted repeatedly into expressing views about women on boards. The researcher found it necessary to repeat some questions and used more probes to bring the interviews back on track.

Appendix D graphs the main changes in corporate governance that had an impact on the data collection.