Expat Workers

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

For most professionals working in the oil and gas industry, a period of working abroad is expected, especially for those wishing to step into senior and managerial roles. In placing individuals and expats in various locations around the world, we are aware that relocating to some regions is much easier than relocating to others and that there are different advantages and disadvantages to every location. Professionals working in the European Union are free to move between other member states as they wish. For those who do so, state-provided healthcare and education is also provided. However, things can be more difficult for other workers in areas of the world.

The United Arab Emirates offers tax-free employment, an appealing expat lifestyle and 365 days of sunshine. The collection of small states on the Arabian Peninsula possesses nearly 10 percent of the world's total reserves and the energy industry provides a substantial amount of income for economic growth. Whilst in the UK and US, qualifications listed on your resume are often just accepted, in the UAE, it is often expected to be authenticated by both the home country and then again in the UAE. These hurdles can take time and delay project start dates which can prove frustrating for employers and employees. In spite of the hassle involved in getting residency in the UAE, the lure of the tax-free lifestyle continues to attract expat workers. According to data from the UAE's National Bureau of Statistics the population of the UAE more than doubled between 2005 and 2010, with expats accounting for around 88.5 percent of the people living there.

However, this year's HSBC's annual 'Expat Explorer' survey which ranks 100 countries on the financial health of foreigners living there found that Singapore is home to the largest proportion of wealthiest expats. These results were in contrast to previous years when the Middle East topped the table. In Singapore, more than half (54 percent) of surveyed expats said they earned more than US $200,000 a year, compared with a global survey average of just seven per cent. But last year, the Singaporean government introduced two measures which make the city state considerably less attractive to expats hoping to settle down in Singapore. Firstly, a 10 percent increase in stamp duty for any foreigner wanting to buy property in the city and secondly, the scrapping of a scheme which let graduates from foreign universities stay in Singapore for one year whilst they sought employment.

We have previously covered the high levels of compensation being paid by companies wishing to recruit foreign talent in Africa's emerging energy markets. Employers recognize that the incentives have to be high because life as an expat in say, Nigeria, is so different from countries with broader industries and higher standards of living such as Singapore and the UAE. The fact that expats demand more to live in Nigeria is unsurprising considering the amount of above ground risk the country is currently facing.

While working abroad can not only is an exciting period for the employee personally, it can pay great dividends both financially and in terms of valuable experience. Ultimately, professionals should consider all angles of relocating internationally from the taxes, benefits and incentives to political and economic unrest and risks associated with living in certain regions.

About the author
Jamie Ferguson joined Maxwell Drummond's Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond's USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Non-Executive Directors

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

A recent survey found that the average time non-executive directors (NEDs) spend on the job has risen to an average of 24 days a year as increasing levels of regulation and risk have placed greater demands on the NED community. Beyond the boardroom, the important role of the NED is largely invisible and poorly understood. Yet when corporate strategies fail or governance lapses, all eyes focus on the contribution, or lack of, of the NEDs. As the role and responsibilities of NEDs widens, the decision to embark on a fresh directorship must be made with a thorough understanding of the challenges and changes facing a NED in today's boardroom.

In 2003, in light of recent public boardroom scandal such as those at Enron and WorldCom, the British Government commissioned the Higgs Review to examine the role and effectiveness of NEDs. Chairman Derek Higgs strongly backed the existing non-prescriptive approach to corporate governance, also known as 'comply or explain' originating from the UK Corporate Governance Code 2010. He also advocated more provisions with stringent criteria for the board composition and evaluation of independent directors. He wanted to remove some of the discretion that the Code allowed. In the US, the Sarbanes–Oxley Act of 2002, (also known as SOX), set new and enhanced standards for all U.S. public company boards, management and public accounting firms. As a result of SOX, top management were forced to individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements, and increased the oversight role of boards of directors.

Whilst the role of a NED varies greatly depending on the business and sector in which it operates, generally there are four areas where NEDs should focus their attention.

• Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy.

• Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitoring and where necessary removing, senior management and in succession planning.

• Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.

• People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and where necessary removing, senior management and in succession planning.

One of the most important attributes of a NED is their ability to offer objective and critical insight into a business. This objectiveness allows them to firstly, protect shareholders' interests and secondly, to ensure that the business is being operated responsibly, both corporately and socially by ensuring that internal controls are in place to mitigate risks. Although only listed companies are required to have NEDs, many private companies are choosing to as they recognise the value of having independent counsel challenging directors. It is an easy option to be on a board that does not challenge itself or implement key performance indicators for the next six months or year. It is a much tougher, but ultimately more rewarding role to develop relevant strategy, tackle challenges and make a tangible impact on a business and its future. The NEDs ability to challenge directors will create richness in debate and thought process in strategy, thus creating better solutions.

The fundamental difference between boards in the US and UK is the separation of a chairman and chief executive role (CEO). As a result of the UK Corporate Governance Code, this has been separated but in the US, it is still common for one person to hold both roles. The benefit of splitting the roles is clear. Who holds the CEO accountable if he or she is also the chairman? Who provides the independent challenge? A rich, independent board, including the chairman, provides for a much better governed and more sustainable business in the long run whilst also protecting stakeholders.

About the author

Jamie Ferguson joined Maxwell Drummond's Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond's USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

CEO Education

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

There has been much debate about the education level required to become a CEO. Technically, any discipline can fill the role, but what makes the best CEOs?

There is no law dictating a tertiary-level education for CEO however most have attended college or university. Completing this level of course demonstrates hard work, exposure to a number of subjects and the ability to work well within a team and also individually- all skills a CEO should have. A degree from an Ivy League school or other highly-rated educational establishment is looked upon particularly favourably because of the competitiveness associated with these courses. Some well-known CEOs, such as Richard Branson of the Virgin Group, didn’t complete tertiary education and have carved out extremely successful careers regardless.

The Harvard Law School Forum on Corporate Governance and Financial Ethics research found that there is no consistent, long-term relationship between CEO education and firm performance. The analysis was extended to six measures of education and three measures of performance; however, it failed to find strong or reliable associations.

The difficulty of evaluating intangible qualities like leadership ability and interpersonal skills means that many hiring committees end up relying on a potential CEOs education, even though studies have proven it has little impact on a company’s performance. When faced with more than one candidate, education is one way of choosing between them. Those making the final decision on hiring a CEO should be careful about the weight assigned to a candidate’s educational background and focus on other factors equally.

An individual’s personality is especially important for the role of CEO. Strong leadership is a trait which is considered essential by many and suitable personality traits can help a CEO rise to the top and most importantly, stay there in tough times. Typically, CEOs are good decision makers, deal makers and communicators, brand advocates enthusiastic about the company’s story and able to gain the respect of employees at every level. A common motto is ‘leaders are born, not made’. Becoming a CEO takes years of hard work and often those who have worked their way up through a company know the firm, its people and culture better than any outsider ever could.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Attracting Talent in Emerging Markets

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

Multinational organizations are constantly challenged with identifying and attracting the most talented leadership and workforce to their companies. While many succeed in doing so in their offices in developed regions, it can be a struggle in the emerging markets they are operating in. As economic activity shifts from North American and European markets to markets in Latin America, Asia and Africa, an accelerated percentage of global growth will take place in these emerging regions, straining the already tight pool of talent.

Talent remains a scarce commodity in emerging economies. Not to say there are not talented individuals within these markets, they just come at a heavy price and this issue makes them hard to retain. A recent report cites paying top people in Brazil, China and India almost double the pay of peers in the United Kingdom. Managers in China, for example, change companies at a rate of 30 to 40% a year, which is five times the global percentage. Obviously, compensation is a key factor in attracting leaders to these regions, though it is a slippery slope as both companies and regions are getting into salary wars, driving inflation up even further. Offering long-term incentives is one way to offer a creative, yet competitive compensation package whilst also aiding the retention of senior leaders.

Global companies must make themselves attractive to locals in the markets they operate in. This includes not only appointing local content to visible roles within the company but also ensuring that the markets in which they are operating in are represented in some way on their Boards. In the US, less than 10% of directors of the largest 200 companies are non-US nationals. Given the international interests of many of these companies, this is a low percentage. Local leadership development is an incredibly important aspect to this. When appointing a local leader to a senior leadership role, these individuals have the cultural knowledge and relationships with key suppliers and contacts, though they may not have the breadth of international experience expats will likely have. In Africa particularly, there is much emphasis placed on local talent. Companies must be aware that if they cannot find an individual with the right blend of experience, they will have to train and develop them. Developing talent will be increasingly important as these markets continue to mature.

When the brand of an organization is developed effectively, this can motivate and excite future leaders to develop themselves and contributes to building a company’s presence on the global stage. The brand story must be authentic and employees must be able to imagine their rise to Board level. Whilst competitive pay and continued training remain important in emerging markets, it is important local employees’ skills and experience gather pace in conjunction with market growth. Employees will value an employer that plays a part in bettering their own country as well as the world economy. Global citizenship is an important value that should be embodied by both companies and employees to ensure the advantages of international business are visible in all office locations.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Gender Diversity on Boards

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

The issue of diversity on Boards of Directors is an increasingly important topic in today’s global oil and gas landscape. Diversity can include ethnicity, gender and experience. By not having a diverse board or executive team, companies can seriously handicap their operations. Having a diversely well-rounded team allows companies to identify and navigate through the human, social, regulatory and political risks that the oil and gas industry constantly faces.

The issue of gender diversity varies greatly between the US and Europe. In February 2010, the US Securities and Exchange Commission enforced new Proxy Disclosure Enhancement Rules to make companies disclose how they considered diversity when choosing new board members. Several EU countries such as France, Italy, Spain and the Netherlands, have already adopted national quotas, but countries such as Britain and Sweden are strongly opposed to doing so. As such, the EU is pushing for legislation requiring that companies with 250+ employees or that earn more than €50m in revenues must report annually on the gender make up of their boards. If this legislation is enforced, failing to meet quotas would subject companies to administrative fines or to barring from state aid and contracts.

The PwC Insights from the Boardroom 2012 survey revealed that racial and gender diversity continue to receive some attention, with 22% and 25% of directors indicating they are “very important” characteristics of new director candidates. Directors at larger companies, (more than $5 billion in annual revenue), assign higher importance to adding racial and gender diversity than do those at smaller companies. Perhaps this is a result of shareholder pressure that tends to focus on larger companies first and then trickles down to smaller companies.

With several oil and gas companies lacking female board members, it is important to understand the importance of board diversity in the first place. A recent study by Credit Suisse found that the more diverse the board, the better the company performs. Diverse boards offer a better mix of leadership skills, access to a wider pool of talent, a better reflection of decision making customers/stakeholders, improved corporate governance and a higher risk aversion.

Executive search firms can play a direct role in aiding companies to diversify their boards. They must act as true consultancies and challenge leaders on the diversity of their boards. When executing board level searches, these consultants must ensure that diversity is addressed on candidate slates to include women as well as diversity in nationality and experience.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Talent Development

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

The complexities of today’s global oil and gas and energy markets have created a rapidly changing role for the Chief Executive Officer (CEO). The Macondo disaster, the economic crisis and the rise of unconventional reserves, to name a few, have created a vast array of regulatory framework and geopolitical uncertainties that now require much of the CEO’s focus.

Gone are the days when the CEO was focused solely on strategy. Many of today’s CEO roles require an extensive understanding of several disciplines from technology and finance to operations as well as a new set of leadership skills. They must have the networking savvy to engage with governments, policy-makers and other regulatory bodies as well as the ability to act as the public face of their company. The industry could potentially face a shortage of future CEOs and executive managers who have the experience and competencies to successfully navigate their companies through the challenges facing the oil and gas industry.

Chief Executives’ cognizance of this threat has added another task to their plates. There is now an added urgency to put more focus on leadership development, though there must be a sound strategy behind it. While companies need to develop their potential leaders quickly, they must also ensure they do not move these individuals into roles before they are ready and run the risk of failure within an often public facing role.

How should they be developed? Historically, leaders have been developed in one of two ways: functional or rotational. Many times, these leaders progress through their company in one functional discipline be it finance, operations or others. While this gives them a deep understanding of one aspect of the business, they may end up lacking knowledge of other departments, thus hindering their ability in a Chief Executive role. Rotational development also proposes challenges in that rotating through different functions within a company may not give individuals the depth of knowledge they need in each area. The key to overcoming these obstacles is to assess for potential early in employees’ careers and start exposing these future leaders to different geographies and disciplines early on so they develop a sound understanding of all business functions.

This practice is a key component to succession planning and may in fact be one of the most important steps in the process. Companies want to promote their own people and talent development gives them the platform to not only accelerate their employees into senior management and executive level roles, but to give them the proper training they need to succeed in them.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Mapping Out an Effective Succession Planning Strategy

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

As companies continue to focus their best efforts on talent management and development, it is important to revisit a key strategy for oil and gas companies’ success in the coming years: succession planning. As many research reports have indicated over the last year, many organizations do not place the emphasis on building this strategy it deserves, thus it becoming a heavily discussed topic. Several questions surround the topic, such as what companies can do to bring these plans to fruition both easily and effectively? How will succession plans differ when preparing for an executive or manager’s departure?

Developing a sound and effective succession planning strategy is not a task to be taken lightly, though a few key practices can go a long way when beginning to map out a strategy. In order for the process to be as effective and painless as possible, there must be buy-in from the Board level and Senior Management from the very beginning of this process. Executives must map out the future of their company and really understand what the company will need in a leader to navigate through the imminent challenges their company will face. There must also be high quality HR leadership to take charge of the planning and to see that these plans are being carried through and to work with the board and senior leadership to set measurable goals. In working with senior management to set goals, the board will gain support for succession planning and establish ownership for leadership development programs. In setting goals, the Board and Senior Management must keep it as simple as possible-measurable goals could include the ratio of internal hires vs. external hires for executive roles or the number of promotions from a company’s high potential pipeline. Too complex of performance criteria could deter those managing the process from executing.

Once these plans have been created at a high level, they can be applied differently to the different roles in need of a succession strategy. The transition from one CEO to the next is a critical moment for companies and puts the organization in a vulnerable state, so a well crafted and smoothly executed plan is essential to the board delivering on their governance responsibility to stakeholders. A plan for CEO succession should be developed and executed at least six months before the current CEO is ready to step down. In the case of an unexpected transition, there should be a pipeline of capable leadership already in place to take the reins if needed. This requires not only a succession plan, but a talent development plan for high potential employees as well. These high potentials should be identified several years before a likely CEO retirement-giving them the time to be trained and developed into C-level managers. This process does differ slightly from mid-senior level management. The timing and transition of this level of role is not as sensitive as C-level positions as they are not quite as visible to shareholders.

As little as a year ago, several research reports were released indicating that the majority of global companies did not have succession plan strategies in place, which is surprising as governance is one of the board of directors’ must crucial responsibilities. Companies are only at the beginning stages of developing succession plans, but we are indeed seeing a rise in positions that are being recruited as a direct result of succession plans being put into place.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

MaxwellDrummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.