Yve Newbold is certainly not afraid of blazing new territories. She was one of the few women to sit in the higher echelons of the former UK-based conglomerate Hanson plc in the mid-1980s; as well as being the only one of her gender with a place on the board as a non-executive director of British Telecommunications in the 1990s. Just as importantly, Newbold was talking about corporate governance and social responsibility long before they became fashionable, both during her time at Hanson and in a later role as head of Pro-Ned, the UK organization for non-executive directors. Today, corporate governance issues are still very much at the top of her mind.
It was her long-standing interest, experience and proactive stance that led the UK’s National Association of Pension Funds (NAPF) to ask her to head its inquiry into vote execution in 1998. The inquiry issued its report on responsible voting last July. This is not the first time that the UK’s comparatively low voting levels have come under intense scrutiny. According to Pensions Investment Research Consultants, voting at the UK’s largest 350 companies has only just reached the 50 percent level for the first time. And that is after several years of campaigning and lobbying. The NAPF first raised the issue in 1991 as did the Cadbury Report the following year, when it asked institutions ‘to make positive use of their voting rights and disclose their policies on voting.’ For much of the 1990s voting levels have struggled to get much above the 40 percent mark. That is roughly half that of the normal level of shareholder voting in the US and lower than a number of other ‘less advanced’ markets which have successfully tackled the issue.
Progress may have been slow over the past ten years but the issue has become increasingly high profile. Last summer, there was concern that shareholders were not casting their votes in the battle over the fate of Allied Domecq’s pub chain; while overall fears are growing that if action isn’t taken soon, the government might take the bull by the horns and introduce mandatory voting.
Handy offer
‘When the NAPF asked me to head up the committee I seized the opportunity with both hands,’ recalls Newbold. She is now a partner at the recruitment consulting firm Heidrick & Struggles. Based in its London office she holds special responsibility for placing non-executive directors. ‘I have always taken pride that the UK has one of the most developed corporate governance systems in the developed world but I wanted to help take it one step further and improve upon the existing model. I am highly concerned about the poor voting levels compared to the US where voting rights are considered part of the fiduciary duty of trustees. If fund managers in the US do not vote, they are seen as being in breach of that law.’
The eight committee members, who were all hand-picked by the NAPF, represented a wide range of constituencies with an interest in the voting process. They ranged from Gavin Downes of Lloyds TSB Registrars to Professor Chris Mallin of Nottingham Trent University. Also included were Graham Williams of the UK’s Investor Relations Society and Simon Osborne of Railtrack.
‘We all worked well together,’ reports Newbold, adding that the committee had two main objectives: to change pension fund attitudes toward voting their shares; and to modernize the system. ‘The vote proxy goes on a paper circuit that is almost Dickensian. Institutions may have come to grips with electronic sharedealing but they are still having trouble with electronic voting.’
The report recommends that institutions start to take their shareholder rights more seriously as well as playing a more involved role in developing voting policies. It called for changes in the law to allow commonplace electronic communication methods – such as e-mail and fax – to be used. It also encouraged pension funds and asset managers to express their views to shareholders about voting. Moreover, the committee took a number of positive points from the American system, although it stopped short of making voting mandatory.
‘We want to encourage institutional investors to look upon voting as part of their fiduciary responsibilities and understand the issues involved instead of just box ticking which is the danger if it becomes mandatory,’ says Newbold. ‘I feel it is a matter of prudent trusteeship that shares be voted and issues understood. They have to be more accountable.’
Newbold’s committee set a goal of 60 percent voting levels to be reached within the next two years. She is hopeful that can be realized, especially on the back of the amendment to the Pensions Act due to appear next year. Under this piece of legislation institutions will be required to set out their voting as well as social responsibility investing policies in their statement of investment principles.
Newbold is particularly pleased about the new amendment but voting rights are only one of her corporate governance hobby horses. The other is what she refers to as her ‘softer focus issues.’ As she points out, ‘I think too much emphasis has been placed on the purely financial results of a company and not enough attention paid to what one might call the wider issues such as environment, social responsibility and employees.’
Failure turning point
Although Newbold became interested in these issues while working at Hanson as company secretary, she believes the turning point for UK plc was in the late 1980s and early 1990s. ‘There was a spate of corporate failures such as Blue Arrow, British & Commonwealth and BCCI as well as the infamous Guinness and Maxwell scandals,’ she says. ‘Looking back, they all happened in a relatively short space of time and people realized we had to play a more active role concerning corporate governance and that there was a need for more non-executive directors on company boards.’
Lord Hanson, however, was not a convert. ‘He was a strong autocratic chairman who once said to me, Don’t tell me about non-executive directors. Anyone worth their salt is a bloody nuisance and anyone who is not a bloody nuisance is not worth having. He was very focused on shareholder value and the bottom line,’ recalls Newbold. ‘It was then that I became interested in corporate governance because I saw the limitations of this particular philosophy. There were hefty financial controls which meant that research and development expenditure was cut and it was difficult to get any capital expenditure through the budget.’
Newbold joined Hanson after working for nine years as a lawyer, first for Xerox in the UK and US, and then as European counsel for The Disney Co. The opportunity to join Hanson at board level, though, was too good to pass up. ‘I joined in the mid-1980s when the company was at the epicenter of Britain,’ she says. ‘It was in the era of the conglomerate and it was one of the fastest growing companies, acquiring and disposing of assets.’
After a decade at one of the busiest coalfaces, she decided to switch gears and joined Pro-Ned, an organization set up to support and promote the advantages of non-executive directors. Newbold also had the opportunity to obtain hands-on experience and a greater insight into the role as a non-executive director for British Telecommunications and then Coutts. Although totally different businesses, the lessons learned were the same.
Persuasive techniques
‘I learned the art of corporate gamesmanship and the techniques of persuasion,’ she notes. ‘I soon realized that it was not always possible to achieve what you wanted in a straight line, which is my natural tendency. As a non-executive, you lose by engaging in a confrontational debate.
It was much better, according to Newbold, to really know your facts and garner support from others well before the board meeting got underway. ‘It was more effective,’ she says, ‘but as the only woman, it was initially difficult to know how to play the game. It was like running into the field, with a ball without knowing the rules. Things are changing now, in that 10 percent of non-executive directors in the FTSE 100 are currently women, although only 1 percent are executive directors, so they are being seen at boardroom levels but are still not heavily involved in the day-to-day decision making.’
It will take time and Newbold herself has become a role model to many women who are today climbing over the obstacles that still exist to get to the hallowed halls of management. ‘It was quite tough being the only woman, but in a way it is an advantage because you know how to juggle,’ says Newbold, who successfully balanced her professional life with four children before the words quality time were even invented. Today, she takes about one-and-a-half days a week off to spend with her granddaughter and mother. ‘I would never describe it as easy but there is a good deal to be said about achieving and succeeding and being in the driving seat of your life.’
Her next project is a departure from corporate governance although it is still in line with her desire to make companies more accountable for their actions. She is chair of the Ethical Trading Initiative, which is looking at the practices of larger retail companies to see if they are applying proper labor standards in their overseas factories. No doubt it is another new territory she will successfully blaze through.
