In this article, NEDonBoard member Angus MacGregor provides his perspective of serving on the remuneration committees of a firm in a non-executive capacity while having an executive HR role within the same organisation.
Currently Head of Global HR for MUFG, a large full-service financial services firm headquartered in Tokyo, Japan, his executive role is to lead the provision of HR and Talent advice and services to MUFG’s international businesses in over 50 countries. In addition, and because he was EMEA CHRO from 2014-2018 for MUFG, Angus joined the remuneration committees (Remcos) of the MUFG boards in EMEA from 2019 as a member. He is the only executive member of the Remcos, on which 4 independent non-executive directors (NEDs) sit.
One of the rationales for me to be a committee member is to represent the head office’s and sole shareholder’s views and opinions.
As many of you will know corporate governance codes in the UK and other countries in EMEA demand independence for Remcos to ensure decisions over compensation, in particular, are objective, fair and meet the needs of all stakeholders.
In my case and role, both the local regulators and our internal auditors have reviewed my unique position to confirm compliance with governance codes. There has been a healthy debate on the matter at the Remcos as a specific audit agenda item. The question of my independence has been interrogated – as well as my competency, added value and necessity – and the findings concluded with that it is a valid and worthwhile role for me to prosecute.
Benefits of an executive carrying out the role
I am in a position to bring a rich context to the debates in any Remcos plenary sessions, private chair sessions and various smaller group and bilaterals outside the Remcos. In fact, the various smaller sessions only happen because I am a member of the Remcos. This adds value to both my executive role as well as to the NEDs’ understanding and as a result a more efficient functioning of the Remcos themselves.
For example, when discussing succession plans for executives, I can provide a view on the executives and their successors and their development plans. I can also provide context for the NEDs to challenge where they see fit. I am also able to bring in the global perspective and, if required, provide comfort to the NEDs that the EMEA Remcos are broadly in line with best MUFG practices, where that may be over and above the required obligations to the local regulators.
Challenges and conflicts
On one level there is no obvious conflict. We act as one team together with the executives in the region to perform the best, and in a controlled and safe and sound way, for MUFG. This is right for about 90% of the time.
For the other 10% of the time there is a rebuttable presumption of a conflict, and a healthy level of challenge and debate ensues primarily because of my executive “hat” at MUFG. Essentially, I wear 2 distinct MUFG “hats” and must operate them independently. I tend to think of it like other executives having 2 or more roles within the organization’s matrix.
However, as humans, it is difficult to compartmentalise completely. For example, the Remcos challenge and agree on a potential course of action because of their fiduciary duties, regulatory requirements and pressures and their judgement and experiences as board members. However, the putative outcome may not be ideal in the short term at least for MUFG and the executives – and for me in my global executive capacity.
In addition, Tokyo management may also have a global perspective and strategy for the business and the executives which is by its very nature less myopic than the position taken in the region. They may want to intervene, and I am the main conduit for that viewpoint. Whilst they will absolutely respect local governance and judgements of NEDs in region, they will want their views put forward and listened to and considered (where relevant) by the Remcos.
This does put some pressure on my independence.
In the end I give my inputs, some of my own and some influenced by other stakeholders. The NEDs know that I will have different perspectives and they know the provenance of some of those and, if I pitch it appropriately, they welcome the rich debate that ensues, and any decisions made are better informed.
Tips and advice for executives doing or contemplating such directorships
I have 5 thoughts:
- Take up such roles if offered to you, for all the benefits to the business espoused above. Such roles are adding context, faster decision-making, board education of the business and an improved perspective and added skills to you in your executive role.
- Have the role and its independence validated by your fellow board directors and if relevant by internal audit and the relevant regulators.
- Be transparent, open, and pro-active when you have a business or head office conflict. Outline the conflict, explain your position and seek advice from the NEDs. If necessary, absent yourself from any such voting on decisions.
- Use the role as a valid reason to spend time with NEDs individually to build the rapport and relationships. This should be mutually beneficial.
- Focus on honing the NED skillet specifically being slightly different to the executive skills that you already have. Speak up, be proactive in plenary and support the Chair. Challenge the data put forward, be curious, focus on any strategic outcomes not necessarily the details and process to get there, help connect the NEDs to the employees. It allows you to practice different skills and may well help you if you are minded to move into NED roles in the future.
Written by Angus MacGregor, Head of Global HR MUFG
If you are new to the non-executive director role, we invite you to watch our webinar How to secure your first NED role. Here is the registration link. You may also visit the NED Accelerator Programme page.