Dec 21 2011
IHG Takes Top Place in Annual HVS European Board Study
InterContinental Hotels Group (IHG), whose worldwide brands include Crowne Plaza, Holiday Inn, Staybridge Suites and Holiday Inn Express, has taken the top place in the HVS Executive Search European Hotel Board study, the fourth year the company has made it into the top three.
The annual study, now in its sixth year, assesses board
performance at Europe's largest publicly quoted hotel groups,
scoring them on four key areas of corporate governance: size,
make-up and independence of the board; presence of interlocks
(arrangement between companies which see the exchange of board
positions); insider participation (where a board member's own
company engages in business activities with the company); and
to pay‐for‐performance for executives and director pay.
The top three places in this year's study were, for the third year running, shared by IHG, Rezidor Hotel Group and Whitbread (see table below) with the top two achieving scores of over 90%. This year the gap had narrowed with just five percentage points separating the top three companies.
However, while it was evident from the scores that overall board effectiveness had improved, more still needs to be done to ensure there is an adequate representation of women on the boards of directors of leading hotel groups, which still does not meet HVS Executive Search's recommended 33% of board seats.
Currently approximately 10% of all board members are women, with only Accor coming close to the recommended third.
Boards must also improve their transparency. With boardroom pay currently a topical issue there needs to be greater disclosure of executive pay rather than aggregate numbers.
"The board of directors is at the heart of the corporate governance system and to be effective must be able to respond quickly to changes in the business environment. To enable this to happen a successful board must adhere to a number of criteria, the measurement of which forms the basis of our survey," commented HVS Executive Search President EMEA, Chris Mumford.
"We find that top performing companies consistently score above 75% in the size and make-up of their boards, significantly above the rest which average at between 33% and 50%. In addition, we have measured whether there is a representation of independent directors, which ensures shareholders' interests are protected. The incidence of interlockers and insider participation is now extremely low in the hotel sector - the days of social ties, business relationships or common backgrounds representing an entry ticket to the controlling bodies of the world's hotel companies are fortunately long since gone.
We have found that the structure of board committees has vastly improved over the past few years, with a better balance of inside and outside membership, plus a sensible frequency of meetings. This is a reassuring indication that compliance with sound corporate governance principles is continuing to take hold, particularly in southern Europe which has traditionally been a hotbed of insider participation and lack of disclosure," added Mumford.
10 FEATURES OF SUCCESSFUL HOTEL BOARDS
- Has between five and 11 directors, with a preference for an odd number to facilitate decision making.
- Has over 75% of directors who are independent outsiders.
- At least one‐third of the board of directors are made up of women
- Should have four committees: audit, compensation, governance and nominating committees
- Maintains the separate positions of CEO and Chairman
- Has a Chairman from outside the company
- Has no board interlocks (arrangement between companies which sees the exchange of board positions)
- No insider participation (where a board member's own company engages in business activities with the company)
- Re‐elects members at least once every three years (ideally every 12 months)
- Has a transparent policy regarding details of directors' remuneration.
SOURCE: HVS EXECUTIVE SEARCH
For further information regarding the survey, including the allocation of points, please contact: