Corporate Governance is dead; long live Corporate Governance

Bob’s Blog published by the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) on 6 April 2018

Corporate Governance turned up a blind alley some 15 years ago. It lost its initial focus on directors delivering the long-term health of their business and degenerated into a series of compliance-fixated, and short-sighted box-ticking exercises. This irritates even more an already angry and disenchanted public who see the consequent erosion of the credibility of their organisations in the private, public and not-for-profit sectors because of the lack of directoral professionalism.

The many international arguments tend to centre on the poor ethical behaviour of directors. And people can become very irrational when focussed on ethics. However, I argue from my experience of boards and directors in some 40 countries that the presenting problems are not ethical alone but more based on ignorance of the legal roles of directors coupled with a lack of induction into these roles, and the non-development of directors’ critical thinking abilities in formulating Policy and developing Strategy. Put another way – directors do not see their roles as professional or even important.

Some Deeper Thoughts on Reframing the UK’s Corporate Governance Oversight and Regulatory System

This is a personal statement added to the submission led by Professor Paul Moxey and colleagues as their response to the request for comments on the proposed changes to the UK’s FRC Corporate Governance Code.

The many current negative news items concerning the ineffectiveness of the present UK Corporate Governance system display only too vividly its weaknesses and the contempt in which the majority of UK citizens hold it.

Oxfam Scandal and the need for Regulation

Letter to The Times, published 14 February 2018

Sir,

Carillion and Oxfam are just the current badly led organisations which will be publicly investigated. The final report will conclude that the organisation was badly lacking in effective corporate governance. Then nothing will be done. A key reason for this is that there is no national organisation charged with the responsibility for taking appropriate action. Too many fragmented agencies can decide that it is not in their remit.

We need a major rethink of the effectiveness of the direction of our organisations in the private, public and charity sectors. I suggest creating a national Standing Commission on Corporate Governance, backed by a Governmental Select Committee focused only on corporate governance effectiveness. At the moment we have such nonsense as the Financial Reporting Council investigating Carillion when they can only debar accountants not directors.

Bob Garratt

Wednesday 14 February 2018

Carillion Raises Questions on Reframing Audit.

Letter to the Financial Times, published 30 January 2018

Sir,

Following the letters from David Herbinet (January 22) and Paul Sanders (January 25) three simple questions are uppermost in my mind.

First, why do companies pay for audits rather than shareholders?  Does this not skew independence from the start?  Second, with the rise internationally of integrated accounting can financial-only auditors cope with the added future demands of environmental and social audits?

Third, as the Financial Reporting Council cannot debar directors, only accountants, why is it leading the Carillion inquiry?

Bob Garratt

Tuesday 30 January 2018