6 'The best board I ever sat on'
The qualities and experience
of the Board
87. Sir Ronald Garrick was a non-executive
director of BoS from March 2000, joined the HBOS Board when it
was formed and served as Deputy Chairman from December 2003 and
Senior Independent Director from 2004. He had this to say on his
experience on the Board of HBOS:
I have no doubt that the HBOS Board
was by far and away the best board I ever sat on. My recollection
of the culture and characteristics of the Board was one of openness,
transparency, high intellect, integrity, good working relationships
between the Chairman and Chief Executive, and a suitable diversity
of backgrounds, mix of experience and expertise to maximise effectiveness
[...] If with the benefit of hindsight I was asked if I wanted
to sit on this board again I would be saying yes.
Sir James Crosby said that a "lot
of consideration" was given to the make-up of the HBOS Board
to ensure an appropriate balance of skills.
He considered that the non-executive directors had the right range
of skills to reflect their responsibility for a diverse financial
Overall, I believe the Non-Executives
were individually and in aggregate well-qualified to oversee the
Group's activities [...] It was [...] always unlikely to have
the concentration of banking expertise among its Non-Executives
as might for example be possible for a business concentrating
entirely on banking.
He noted the engagement of non-executive
directors with the business at board meetings and outside, and
recollected that the Board had "lively debates":
I think our chairman was good at
encouraging the board to focus on the substantive issues before
them, so that we could, within an acceptable time frame of the
meeting, have good discussions on the substantive issues.
88. Andy Hornby felt that "the
HBOS Board always had very extensive banking experience".
He observed that Anthony Hobson, Chairman of the Audit Committee
"had very considerable relevant experience in the financial
services industry, including having been Finance Director of Legal
& General for approximately ten years".
Anthony Hobson himself stressed the diverse experience of board
members and considered that the qualifications of the Board were
"at least as good as those found on the Board of other UK
financial institutions at the time".
Sir James Crosby felt that the Board had possessed adequate experience
among its executives and non-executives to challenge the Group's
corporate banking activities.
Andy Hornby never considered that the non-executive directors
"felt restrained from challenging the executive team in whatever
way was most appropriate".
89. Lord Stevenson did not accept that
the board he chaired failed in its challenge to the executive.
He said that much thought was given to ensuring that "there
was a lot of challenge and different ways of challenging".
an atmosphere where people were
able to be very direct and blunt. There were one or two occasions
when great offence was caused, but we had a very open society.
There was constant challenge, not just of corporate, but of the
In conclusion, he told us:
I think the governance was rather
good. That does not mean to say it was perfect. I am open to any
suggestions how it could have been. The board meetings were functional
and gave huge opportunity for challenge.
90. The positive self-assessment of
the abilities of the HBOS Board was echoed by the views of the
FSA. According to Clive Briault:
The risk assessments during the
relevant period indicate that corporate governance was thought
to be effective at HBOS. There was some banking experience among
the non-executive directors and a considerable amount of wider
91. The corporate governance of HBOS
at board level serves as a model for the future, but not in the
way in which Lord Stevenson and other former Board members appear
to see it. It represents a model of self-delusion, of the triumph
of process over purpose.
92. Peter Hickman said that the expectation
was that the Board would approve the executive business plans;
challenge would be expected to come from the executives, rather
than the non-executives or the full Board. He could not recall
any significant change made by the Board, if any.
As with other boards, the Board of HBOS on occasions had an opportunity
to assess its own performance. On 24 February 2004, the minutes
record it being told the following:
The Board made effective but supportive
challenges, as necessary, and would not seek to second guess executive
management's formulation of strategy.
The Board, in its own words, had
abrogated and remitted to the executive management the formulation
of strategy, a matter for which the Board should properly have
93. The executive leadership represented
on the Board came predominantly from a retail and insurance background.
Sir James Crosby had an insurance background and Andy Hornby came
to HBOS from the retailing industry. Its successive financial
directors came from predominantly insurance or retail banking
backgrounds. As Sir James Crosby conceded, this led to too much
faith being placed in the senior executives with corporate banking
experience, Colin Matthew and, in succession, George Mitchell
and Peter Cummings.
Andy Hornby also agreed that, in retrospect, insufficient attention
was paid at the highest level to corporate lending compared with
There was insufficient banking expertise among HBOS's top management.
In consequence, they were incapable of even understanding the
risks that some elements of the business were running, let alone
94. The non-executives on the Board
lacked the experience or expertise to identify many of the core
risks that the bank was running. In Sir James Crosby's revealing
phrase, it was not composed in a manner that would be appropriate
for "a business concentrating entirely on banking".
The board was composed in a manner which appeared suitable for
a retail-oriented financial services company, but that board lacked
the necessary banking experience among its non-executives, particularly
in relation to higher risk activities, for a bank whose strategy
and business model was posited on asset-led growth led by non-retail
divisions of the bank.
95. Judging by the comments of some
former Board members, membership of the Board of HBOS appears
to have been a positive experience for many participants. We are
shocked and surprised that, even after the ship has run aground,
so many of those who were on the bridge still seem so keen to
congratulate themselves on their collective navigational skills.
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