Many people will have noticed the difficulties that ITV are having in finding someone to take on the role of executive chairman following the resignation of Michael Grade.

Now given the intense competition for ratings and the advertising revenues which depend on them, one might have thought that actual experience of the TV media or advertising, or preferably both, would have been an absolute sine qua non for an executive chairman. But the search being conducted by Sir James Crosby, widely remembered as chief executive of the collapsed HBOS bank, appears to rule out people with actual knowledge of the business they might be asked to run, such as the Chief Operating Officer who has been more or less running the show  at ITV for several years. Now why is this?

It is probably true that experience and working knowledge of a business is not a sufficient qualification on its own, but it should surely be a necessary qualification. But current British business ideology says a board must be lead by someone  who “doesn’t get buried by detail”  but can instead take a broad and lofty view of the business the company is operating in.  Above all, the chairman must able to “get on with people” especially of course those whom he chooses to be on the board with him i.e. his chums.

It is true that a competent business leader needs to be someone with a mind and knowledge capable of analysing a broad range of matters, some  of which may be outside the company’s direct control,  e.g.  the general economic situation or the direction of technologies which could affect the company in the future. But how often is this test applied to company chairmen?

What we have is an ideology that just about guarantees that a forceful chief executive will not be seriously challenged, as we saw so clearly with the catastrophic mismanagement of Royal Bank of Scotland by Sir Fred Goodwin, a Bank now majority owned and controlled by the British taxpayer.

At the time of its collapse not one member of the RBS board had a banking qualification and apparently any knowledge of the despised “detail” of the £17 billion of dodgy (i.e. valueless) loans which the bank had made in the vanity-driven pursuit of  “biggest bank in the world” status.

In effect this ideology of ignorance means not only that many of our most important businesses are incompetently run, but also  that people working in these businesses are excluded from the top job. What sort of incentive is that?

What can we do to correct this absurd and ruinous cult – not so much of the amateur (a purely British practice) but of the ignoramous?

A start can be made by requiring all directors of PLCs to have passed a written examination on the Companies Acts 1985 and 2006 which lay out their duties and responsibilities of care to their company’s shareholders and employees. They should also be required to demonstate a rudimentary knowledge of accountancy.

Secondly, executive directors of PLCs should be able to demonstrate a senior qualification in the industry which their business is actually in and which is demanded of their employees in management and operations, e.g. engineering, pharmaceuticals, advertising, building, banking, food processing, financial services, IT,  and so on. If this means that some directors or would-be directors have to go back to school, well so much the better for the job security of their employees and the returns on their shareholders’  investments, which, it should be remembered, are principally returns to pension funds and unit trusts in which virtually the whole nation has an interest.

Thirdly, non-executive directors should be able to demonstate a senior qualification in an industry which the business  of which they are directors   may reasonably be influenced by, e.g.  its suppliers or customers.

Fourthly, why shouldn’t the top jobs in PLCs  and the public sector be the subject of competitive bids in exactly the same way that tenders are invited for the supplies of every other service and product?

There would be no requirement to accept the lowest bid, but if someone well-qualified in the way defined above offered to do the job for say £250,000 instead of £500,000, wouldn’t that do wonders for competition and competence. It would certainly put a real crimp in the “chums ” network and save a company a lot on headhunters’ fees!

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