04 July 2019 by Sonia Sharma
The Governance and Standards Adviser at the City of London Corporation talks about a new era of trust, technological disruptions and the future board
Mary Kyle qualified as a solicitor at Allen & Overy in the insurance litigation team before moving to Collyer Bristow’s financial services disputes group specialising in interest rate hedging, product mis-selling and benchmark manipulation. In early 2017 she joined the City of London Corporation where she looks at how the Corporation can support businesses to adopt good governance practices and investigates the positive impact that corporate governance can have on stakeholder relationships and financial performance.
On July 9th Mary will be speaking at the Annual Conference on the keynote panel titled ‘Changing perceptions: a new era of trust’. She says: “As the focus on environmental, social and broader governance issues continue to increase, how an organisation is judged and what kind of behaviours are essential for exhibiting trustworthiness will also evolve and institutions need to adapt in order to retain trust”.
One of our main interests in corporate governance is helping to shift the approach from it being seen as a compliance concern to a strategic opportunity. As part of this focus, we are working with businesses to highlight the benefits that meaningful engagement with governance issues can bring. This includes partnering with other organisations on specific topics such as fostering a positive ‘speak up and listen up’ culture and looking more generally at the impact that good governance can have on a business in terms of financial returns and improved stakeholder relations.
At an international level we are also looking at the potential role of governance in capacity building within developing markets and helping to increase investor confidence and investment flows. The UK is in the closing stages of reviewing and revising its own approach to corporate governance, and to the extent that we can share some of our learning and experience from that exercise to assist others we should look for opportunities to do so.
Governance centres on relationships and culture and to derive value from that it is important for a company to engage meaningfully with these issues. If it does so then there is the potential to not only improve internal relations across the workforce, but also build more inclusive working practices that enable the business to harness the potential and skills of its entire workforce rather than just those sitting in senior positions. As well as increasing the potential engagement with internal stakeholders, good governance can also help redefine external stakeholder relations which will support an organisation to evolve to meet consumer demand and societal expectations which are vital to its long-term viability.
Good governance within the context of the board creates its own value. A board that is committed to long-term thinking, creating a positive culture and transmitting a clear purpose through its organisation will be more capable of adapting to meet emerging trends and will hopefully avoid some of the pitfalls that can cause difficulties amongst even some of the most experienced boards.
Building consumer and client trust is often a key focus of many organisations who quite rightly view it as a vital component of long-term success. However, there are some important factors which are often overlooked. The first is that building trust is an output of being trustworthy and so that should be the starting point. This requires engaging with institutional behaviours at a base level and reviewing culture, purpose and actions rather than focusing on a company’s external appearance.
The second point that is often not given sufficient weight is that building trust and confidence usually starts with simply being able to do the basics well. There’s little value in adding a variety of special features to a product or service if it fails to deliver on its primary objective. This may sound trite, but often in an organisation’s attempt to position itself above its competitors or develop a unique selling point the importance of its core offering gets lost and the credibility of the company suffers as a result.Finally, it is important for an organisation to remain in touch with the expectations of not only its clients and wider stakeholders, but also society more generally. As the focus on environmental, social and broader governance issues continue to increase, how an organisation is judged and what kind of behaviours are essential for exhibiting trustworthiness will also evolve and institutions need to adapt in order to retain trust.
Technology has a hugely significant role to play in corporate governance. It has increased the scrutiny of companies due to the ability for information to be disseminated more widely through social media and also in many cases by simply increasing the amount of data that is available about companies which can make it easier to compare and critique their processes and practices. Whilst this can sometimes have a negative impact on trust, technology also has a role to play in building trust between providers and consumers by creating broader and improved channels of communication and opening up or improving the dialogue with key stakeholders. Emerging technology, particularly in the RegTech space, also has the potential to make positive contributions to the ability of companies to practice good governance and build more trustworthy behaviours.
Tools that help automate some of the more repetitive compliance functions will free up time for key individuals within organisations to devote to more esoteric considerations of culture and governance while other innovative solutions are emerging which support companies to assess and improve their governance practices more fundamentally.
My hope is that the future board is equipped to deal with those issues that we’re currently not aware of and potentially don’t even exist at the moment. In seeking to achieve that, our boards of today will need to be open to emerging technology and new forms of talent which are likely to transform the way that business is carried out over the next decade and will help to ensure that they have the necessary people within their workforce to lead them through those changes. Technology (whether in relation to cyber security or innovation) is so often cited as a key concern of boards, but the level of experience in these amongst the directors often remains worryingly low. This needs to change over the next few years to ensure that the board is not holding back the business from evolving as it needs to in order to survive in an ever-changing technological and social climate.
Interview by Sonia Sharma, Editor of Governance and Compliance