PracticeConsultingEditorial – Sir Ronnie missed the point

Editorial - Sir Ronnie missed the point

Sir Ronnie Hampel summed up his committee’s final report on corporate governance last week in these words: ‘Good governance requires judgement, not prescription, and for that reason I believe it is in business’ own interest to conform, and that it will.’ Not bad as a pious hope but, like his report, it completely misses the point.

Corporate governance is fundamentally not about helping the good guys to do better but about exposing the liars and the crooks. Hampel’s failure to grasp this central point is largely due to the fact that he and his committee have allowed a statement of the blindingly obvious to dominate their thinking.

Who would dispute their argument that corporate governance systems must not hamper corporate success?

But Sir Ronnie and his team seem to have gone to the other extreme and tried to argue that changing anything will be bad for business. In fact, not strengthening corporate governance structure will be far worse for business than leaving the present system unchanged.

Most of the larger plcs will, as Sir Ronnie believes, see that it is in their interests to be open and above board.

But what about those who are neither open nor honest? Hampel’s final report offers nothing new to prevent major corporate failures like BCCI or Polly Peck.

Ministers will now have little option but to step in and remedy yet another failure of self-regulation.

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