What does this tell us? Well, first of all, that we are all subject to
temptation. These scandals are more likely to happen where we are not closely
observed, proving once again there really is a value in the independent
Secondly, it should once and for all put to bed the argument about the
‘payback’ for good corporate governance. Corporate governance is not like your
budget for advertising increased in the fat years and suspended in the lean
ones. It is more like insurance.
Would you refuse to pay for house fire insurance because there had been no
fires for the last five years?
Thirdly, there is a terrible lopsidedness to the way fund managers look after
our money. Analysts will research many things such as the prospects for the
market, the competitive landscape, and the implications of new technology. But
still they do not have a method for working out whether a company has a robust
and trustworthy culture.
It isn’t that difficult to tell. Just read the accounts of life in Barings or
Enron. People who worked close to the culprits had their suspicions. All these
companies have statements of their values the key to detecting rampant
self-interest is to test if these individuals’ actual behaviours live up to the
values of the organisation.
So why do those who look after our money choose to cut themselves off from
It’s because they have such a one dimensional view of business. They think of
a business as if it were a machine running on money (financial incentives). To
improve its performance, simply align the interests of the people at the top of
the company with those of the shareholders.
But hold on a minute. What about loyalty, trust and discretionary effort?
What about the people who stay longer in their jobs than the two and a half
years that the average CEO works. What if the machine they have been invested in
is being run into the ground by a CEO who is not worried what problems he
bequeaths to his successor?
Until our investment community learns to sniff out and value the leadership
and atmosphere that gives you honest commitment, reliable endeavour and
politics-free offices it will always be vulnerable to the sharks and charlatans
that have too often impressed it.
Mark Goyder is director of Tomorrow’s Company
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