Mervyn King: A Combative Chairman

Does a chairman lose his authority if his board votes against him? Bank of England governor Mervyn King may be asking that after fellow members of the monetary policy committee blocked his bid to increase the quantitative easing programme by £75bn.

In a public company, opposition to the chairman might not be known to the outside world because minutes are not published. But even if the dissent does not leak, fellow directors may lose confidence in the head of the board.

Healthy debate within the boardroom is good -- a table of yes-men is no use. But a clever chairman will avoid exposing schisms by careful conduct of meetings.

King apparently likes to declare his hand at the start of the MPC sessions, telling committee members what he wants and effectively challenging them to dissent.
A more subtle chairman listens rather than talks -- though who he chooses to speak, how long he gives particular views and the intensity of the questioning can ensure his point of view prevails.

And a chairman does not need to vote. Indeed, he does not need to take a vote. Having allowed discussion he can declare to have detected the mood of the meeting and leave it to dissidents to demand a poll -- a challenge they are unlikely to take up unless they think they have sufficient support to win.

Even if voting, the chair can either vote last or only if a casting vote is required. Part of the Bank of England's problem is that it allows the MPC chairman to vote twice. Not surprisingly, the governor's casting vote is always the same as his original decision.

The Bank's dilemma is heightened because, contrary to good governance guidance, it has an executive chairman. The governor is effectively chief executive and expresses his view as leader as well as co-ordinating the debate. Whereas non-executive chairmen can suppress their view to achieve unity, a strong executive may think it important to stick to his guns even when others are unconvinced.

Voting against the governor is not a coup, of course, but if this was a public company and the difference of opinion was fundamental, either chairman or dissidents might feel obliged to consider their long-term positions. The MPC is only a Bank committee, albeit the most important because it decides interest rates and, now, quantitative easing. The extra £75bn King wanted was big money even if the bank is printing it. Governance purists may note that the new Banking Act will replace the governor as chairman of the bank's court -- its equivalent of the plc holding board - with an external and independent chairman. The Bank of England might like to borrow from the best practice from British boardrooms.

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