I’m on the board of four large, public companies: Louis Vuitton Moet Hennessy (LVMH), Jardine Matheson, Hong Kong Land, and Northern Trust Corporation. I’m also on the advisory boards of a few other companies. When you’re on an advisory board you do not take a statutory role with specific obligations. As you’re simply giving advice, there is less potential for conflicts of interest.
My first board position was with the National Westminster Bank, which was Britain’s biggest bank at that time. The Chairman of the bank had known of me and wanted to have someone on board with international expertise, including knowledge about Asia, which wasn’t widespread at that time in British business.
It could also be that you are introduced to a new company because you’ve worked with someone connected to them. Jardine Matheson had a number of Caterpillar agencies in Taiwan, Southern China, and so on. As I was on the board of Jardine Matheson, I was brought into contact with Caterpillar. The Chairman approached me and asked me to join the board at Caterpillar. As long as I didn’t get involved directly in decisions involving dealerships, I was clear of conflicts.
Boards are no longer the old boy, old school tie network they were once famous for being. Nowadays, you can register yourself with headhunters for non-executive board positions as well. I’m sure headhunters are responsible for at least half, if not more, of non-executive board appointments today. If you’re looking for an additional board to contribute to, headhunters are a good place to start.
When selecting boards, a general rule of thumb you should follow is to avoid getting involved in companies that have overlapping interests. For example, I’m on the board of Louis Vuitton so I’m obviously not going to seek to join the board of another fashion house such as Gucci. However, if you do find that a potential conflict of interest may arise, declare it openly and take yourself out of the discussion.
I was on the board of Caterpillar, which is a heavy machinery company. I was also on the board of Textron, which builds business jets, helicopters, and so on. Textron also had a smaller business that built cranes. While Caterpillar didn’t actually build cranes, I could see that cranes came pretty close to heavy machinery. So if there was a discussion about Textron cranes, I would simply excuse myself from that conversation so it wouldn’t impinge on my Caterpillar interests. This is a small illustration of the kinds of issues that could arise if you’re on multiple boards.
Where a conflict of interest can become a real issue is in Government and Parliaments. I’m a member of the House of Lords in the UK, and I serve on several committees – at the moment, I’m on the National Security Strategy Committee. Sometimes, our discussions involve defense. I also advise defense companies. My interest has to be declared publicly in the Committee’s reports so that people can factor this information in.
Members of the House of Commons are much more restricted in working with businesses. However, quite a few members of the House of Lords are on boards, and it’s not seen as an obstacle as long as you declare your interests. You’re on your honour to not let your interest interfere with your judgement.
With conglomerates with multiple business lines, you have to be particularly alert to any competing interests that may come up. There are areas where two companies whose boards you’re on may do business with each other. For instance, LVMH may lease a premise from Hong Kong Land. If you're an executive director, you won’t be engaged in any negotiations between the two, but you should still make sure that both companies are aware of your roles.
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Umbra Capital Partners