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So You Think You Should be a Direct Report to the CEO…

July 1, 2016

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At big companies, they are seen as the elite – Direct Reports are regarded as the leadership group, the people who really matter. Increasingly over the past decade, Heads of Corporate Affairs have broken into this group. CEOs who understand the importance of reputation to their business want the person responsible for managing it at the ‘top table’.

Paradoxically, that trend is changing as CEOs and Boards demand an even more sophisticated and strategic approach to reputation. Corporate Affairs in some companies is becoming part of a wider portfolio with overall responsibility for risk generally.

In these companies, Corporate Affairs is tasked with ensuring that an understanding of reputation risk is embedded across the business, and that such an understanding influences strategies, operations and processes.

The function is required to work with Boards and CEOs to identify the company’s risk tolerances on reputation and to ensure those tolerances are aligned to the business purpose and strategy.

The result of this emerging approach is that traditional Corporate Affairs professionals have to compete with lawyers, risk specialists and general managers for the top job in a function that brings together previously discrete functions.

While this trend is more common in Europe and North America, it is starting to happen in Australia – at BHP Billiton, for example.

Back in 2013, BHPB restructured Corporate Affairs to ramp up its influence in strategic decision-making.

The company appointed a new President of Corporate Affairs, gave him a seat on the Executive Management Team and made him a Direct Report to the CEO, Andrew Mackenzie.

Now it has rolled Corporate Affairs into a wider risk management portfolio. Geoff Healy, Chief External Affairs Officer, now heads up risk, legal, the company secretariat function and Corporate Affairs.

A consequence of this emerging new thinking by CEOs and Boards is that we need to think differently about what the modern Corporate Affairs team should look like.

We will need people with commerce degrees and MBAs as well as people with communications degrees, people with analytical skills, emotional intelligence and cultural awareness, people who can influence senior leaders and put themselves in the shoes of stakeholders and clients.

There are other key functions that those kinds of Corporate Affairs people could run – and there is some evidence that is already happening:

  • At HSBC, Pierre Goad, who previously managed Corporate Affairs, has been promoted to Group Head of Human Resources with both the HR and Corporate Affairs functions reporting to him.
  • At Bank of America, Anne M Finucane is Vice Chairman and a member of the Executive Management Team. She has a background in communications, is responsible for strategic positioning and oversees public policy, customer research and analytics, global marketing, communications and corporate social responsibility.
  • At Standard Chartered, Tracy Clark is Director, Compliance, People and Communications and Regional CEO Europe and Americas. Her portfolio encompasses legal and compliance, financial crime risk mitigation, human resources, corporate affairs and brand and marketing.

Executives like these with wider, more strategic mandates are more likely to be appointed a Direct Report, particularly in very large global companies.

This is an argument that does not go down well with some of the Corporate Affairs professionals I speak to. I do have some sympathy for the view they often express that making the Head of Corporate Affairs a Direct Report sends a powerful message to an organisation that the CEO recognises the critical importance of reputation.

But I also understand the desire of most CEOs to limit, rather than expand, the number of people who report directly to them.

The real test of Corporate Affairs’ influence is not whether the head of the function reports to the CEO – more important is does he or she have access to the CEO and Executive Committee on the issues that matter and are they respected and accepted as trusted advisors.

The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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