So farewell then, corporate governance reform

So farewell then, corporate governance reform.

The absence of any reference to corporate governance reform in yesterday’s Queen’s Speech, and the earlier defenestration of Nick Timothy, the advisor who was allegedly its most enthusiastic proponent, appears to have put paid to some of the more radical proposals in the Conservative Party’s manifesto.

It is not dead yet, of course. Many of the ideas aired in the Green Paper published late last year never needed primary legislation in the first place, and BEIS will in due course report on which if any of those they intend to take forward.

And while the FRC’s bid for more enforcement powers appears to have been scuppered, it is presumably still committed to revising the UK Corporate Governance Code – and, based on my own experience when there, will undoubtedly receive many helpful suggestions from the Government on how to do so. Paul George, the FRC’s Director of Corporate Governance and Reporting, will be speaking at ICSA’s annual conference on 4 July, and it will be interesting to hear what he has to say.

In any event, some of the specific proposals that now appear to have been shelved may not be missed. Twenty years of regulating executive pay have shown us that reporting and voting does next to nothing to control it, so not doing more of the same may be no great loss. Doing nothing at all, on the other hand, would be.

A similar argument applies in respect of employee and stakeholder engagement. Whatever one’s views of some of the specific ideas in the Conservative manifesto, I think there is a degree of general agreement that the time has come to recalibrate the weight given by boards to the impact on shareholders and other stakeholders. That is not to say that shareholders’ rights should be reduced – some of the arguments advanced for doing so are spurious in the extreme –, simply that not enough consideration has always been given to the impact on others. The initial insight that led the Government to focus on this issue remains valid.

If the apparent absence of any primary legislation means that we need to seek pragmatic solutions to these issues that would generate less headlines but would have more impact, then that would be no bad thing. Taking the politics out of regulation usually leads to a better outcome.

There is one other event that, by coincidence, occurred this week that might also point a way forward, and that is the announcement by the SFO that it is taking action against Barclays and some of its former executives.

My personal view is that the absence of visible punishment for bad behaviour by board members has been a major contributor to the sense of unfairness – one rule for the rich and another for the rest of us – that many people feel.  Admittedly the fact that action is being taken against a bank that did not need bailing out rather than one that did may sound a bit topsy-turvy to the average person in the street. But if it turns out to be the start of a trend, it could have more impact on both the behaviour of directors and the perception of the public than any number of new reporting requirements.

ICSA’s Annual Conference 2017 takes place on 4 and 5 July at London’s ExCel centre. Details of the programme and how to book can be found at

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