Graham Goodhew: Independent Non-Executive Director & Investment Funds’ Corporate Governance Expert
Graham’s life can best be described as working-in-retirement as after a career spanning some 40 years in and around the funds industry, both in the UK and now in Luxembourg, he continues to stay very engaged as an independent non-executive director in retirement. In this inaugural UKFB Interview, Graham addresses several issues that are likely to confront both UK fund managers as well as aspiring iNEDs, as the UK fund industry faces down the 30th September 2019 deadline to implement legislative changes brought about by the FCA’s Asset Management Market Study.
Excerpts of the UKFB interview with Graham Goodhew:
Your initial assessment of the new regulations resulting from the Asset Management Market Study as it pertains to independent directors for UK fund managers:
The requirement for independent directors to sit on the boards of management companies can only be a positive move for fund investors and an opportunity for the fund industry to improve their credibility with clients.
If the industry had taken the initiative earlier to move towards a more transparent governance structure maybe it would not have been imposed by the regulators in a rather short time-frame.
The annual “Assessment of Value” document sits at the heart of these new regulations. Your views on the industry being able to produce a framework that is deliverable in the time-frame and yet useful for the intended audience by the end of next Sep. Also, your advice for asset managers as they seek to transform themselves to create a board environment fit for purpose:
No board can determine whether they are “fit for purpose” and are fulfilling their responsibilities if they do not have an agreed “code of conduct”, or other guidelines, which guide their workings and, a way of assessing how they are meeting their responsibilities through a regular process of board evaluation.
In Luxembourg the Code of Conduct issued by the Association of the Luxembourg Fund Industry (ALFI) for both management companies and fund boards has been in place for several years and has been widely adopted by the Industry.
Adoption of a code of this nature and an annual honest assessment by any board as to how they are complying with their adopted code would go a long way towards achieving the “Assessment of Value”.
As to transformation I would recommend that a board first conducts a board evaluation to see where they fall short of both the new requirements and required skills.
They should then look to recruit new directors to fill any skills gaps.
While the regulator is looking for two independent directors to be appointed the fund board must also consider that the right people are being brought into the board and that, at the end of the day, the board is collectively structured to fulfil its responsibilities.
This is not a box-ticking exercise achieved by desperately grabbing the first two potential directors who walk through the door.
Getting the first NED role is always the toughest. What three tips/suggestions do you have for aspiring independent directors:
The first tip for any aspiring independent directors is make sure you understand the personal liabilities and responsibilities that you are taking on as a director. Make sure you understand the time commitment and work required to do the job properly, it is no longer just a case of turning up once a quarter for a meeting.
As with the job itself there is no simple “checklist” to successfully being appointed as an iNED but the following are various approaches to consider:
It is probably true to say that many board appointments still owe more to the “network” than to a scientific assessment of multiple CVs submitted in response to openly advertised board positions. This is changing and there are many head hunters in the marketplace who handle board appointments.
It is also quite common for fund managers who are looking for NEDs to reach out to their services providers, particularly the Accountancy and Law firms. While these either cannot, in the case of audit firms, or perhaps should not, in the case of Law firms, take on iNED positions themselves they are of course well connected within the industry and able to suggest suitable candidates.
There are a number of companies who work very much as partnerships and specialise in providing potential iNEDs from their panel of experienced directors. These also often provide administrative support to the directors which maybe, secretarial, compliance, risk management, etc.
Are you in favour of caps on the number of directorships an individual can hold? Is there any ideal number per head, and if so, what’s the rationale:
There is no simple formula of number of mandates divided by available working hours that in my view can work.
A good director knows how many mandates their can handle based on the nature and complexity of each of their mandates.
It is incumbent on each director to realistically assess the time required for each mandate in both the normal BAU environment but also in stressed markets where multiple emergency board meetings many be requested on the same day. They need to be ready and able to answer any challenges from regulators who may consider that they are over stretching themselves.
Who’s Graham? In his own words
I retired in 2016 as a Director and Conducting Officer (CO) of JPMorgan Asset Management in Luxembourg after a career of more than 40 years in financial services. With a background in Internal Audit and Risk Management, I moved from London to Luxembourg in 2001 as Head of Risk Management for JPM covering the Luxembourg SICAV and UK OEIC fund ranges and was a director of the Luxembourg Management Company from 2002 until retirement.
In 2005, I became Head of Corporate Governance and the CO responsible for Portfolio Risk Management, and also served as the CO responsible for Fund Distribution and Investment Management.
Active in working groups at CESR/ESMA, EFAMA, ILA and ALFI related to UCITS, MiFID, PRIPS, Risk Management and other industry issues he remains active with ALFI and ILA, I like many other Brit expats continue to live and work in Luxembourg as an independent director “in retirement”.