More substance and less form
The UK media and their audiences have, over the last few weeks, enjoyed clashes between shareholders and the boards at Carlton and BSkyB.
I put it this way intentionally. In relation to corporate governance, what the majority of the media have shown most interest in are personality issues – perceived fat cats’ apparent battles for power.
How often do we see stories about the less sensational, yet vitally important, aspects of governance; the work being done by companies to develop their directors and evaluate board performance?
Too much emphasis, is placed upon board structure and the personalities on the board. In the past, not enough importance was given to the skills and competence of the members of the board, the way the individuals work together to create an effective whole and how this is evaluated. New in the combined code, and at the forefront of governance practice around the world, we now have comprehensive provisions relating to board appointments, development of directors, performance evaluation and succession planning.
At the IoD, we are delighted about this. With our chartered director qualification – the world’s first independently accredited professional qualification for directors – and the rest of our work in director development, we see the expertise and competence of directors as being at the heart of governance.
We wait with interest for the way in which these new provisions are implemented by companies and perceived by investors, the media and others.
But why are these things important, and what improvements might they bring about? They are important because corporate governance is not an end in itself. It is one part of what should be a common ultimate aim of directors and investors – the long-term success of the company.
At the heart of both governance and performance is a high-quality, effective board. If investors can be satisfied that the board is actively and appropriately engaging itself in these matters there is a chance that in future we may develop a climate in which substance is given more weight than form.
- Patricia Peter is corporate governance executive at the Institute of Directors
Transparency must be seen
There is no formal across-the-board procedure for selecting a new chief executive. And there doesn’t seem to be any pressing demand to implement one so far. Each company deals with such selection processes on a seemingly ad hoc manner.
However, last week’s news that James Murdoch was voted into the position of CEO of BSkyB, and the ensuing dissatisfaction from some of the UK’s largest investor groups, proves that something needs to change.
A father and son management team at the helm of a public company has left investors concerned about how fairly the team will operate.
New rules on corporate governance, audit committees and the role of non-executive directors should allay many fears of too much power being held by too few. But there remains the issue of communication and transparency.
And here one more thing needs to be factored in – that of personality.
Some dismiss personality traits and instead focus on skills among the other key abilities needed to be a good manager. And yet traits such as integrity, impartiality, self-belief and confidence are just as important in the business world where a decision can affect billions of pounds of investment.
Personalities of the board are just as critical as the skills they posses.
And the way each board member works within a team is of equal importance.
For example, what kind of a board member does it take to cancel a scheduled meeting with the Association of British Insurers ahead of last week’s decision to appoint James Murdoch?
No one has publicly disputed that last week’s process was fair. What has been disputed is its transparency.
And as the accountancy industry knows only too well, perception matters.
The wrong perception can bring businesses to their knees.
Transparency can’t just be. It has to be seen to be.
The lessons that can be learnt from this selection process and the coming months should not be pushed aside for another day, but perhaps taken a step further and implemented into best practice. That of course is down to the investor community to exert its force.
- Michelle Perry is features editor of Accountancy Age.
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