Local authority run-companies 'should avoid too many council board members'

12 Jul 17

Local authority-run companies should avoid having too many council members on executive boards to ensure commercial success, CIPFA’s annual conference was told.

The advice on governance was issued today by Mike Britch, chief executive of Norse Group, a firm with a £300m turnover wholly owned by Norfolk County Council, at a workshop on councils and commercialism.

He told delegates the presence of too many members on executive boards could hamper the agility that a small and focused board needed to efficiently deliver services in a commercial environment.

Britch said: “You can’t run a commercial service as a department of a local authority, that means you have to get yourself from under the shackles of a 151 [financial] officer, the monitoring officer and everybody else who wants to reduce what they perceive as the risk to their shareholders.

“You need to have commercial and operational freedom to trade and to make the decisions you need to make.”

Britch explained that Norse Group, which employees 10,000 people, has a board of just five members, three executive directors, a chairman who is a chief officer from the county and finally a member from the council.

Adding: “Having a small board, meeting on a monthly basis, enables us to get through some quick decision making and getting the shareholder [council] to allow you to make decisions without referencing back to them within certain parameters is clearly an issue for us.”

However Britch did say from his experience it was good to have at least one member on the board because it gives them a “political bridge” back into the authority, which can help influence the council’s strategy.

He stressed: “I think it's about limiting the number you have got there [on the board]. You can’t run a business by committee, it has to have a degree of focus and agility".

Britch said in some competitor businesses they had boards of 12 and 15 members and officers. “I just think that would be a nightmare, because what you end up doing is the least risky thing or the least palatable thing rather than the right thing," he stated. 

Helen Dobby, group manager for Commercial Services at South Hams District Council & West Devon Borough Council, who also spoke at the commercialism workshop, said she agreed with Britch’s point.

She said the intention for commercial enterprises from the two councils was to have at least one person from a commercial background on the boards of these businesses.

Their approach was to “delegate out” as much of the operational decision making to business experts leaving the board to focus on reserved matters.

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