27 September 2016 by Alexandra Jones
It will take time, as new values become embedded and top teams are refreshed, to see tangible change
During her leadership campaign this summer, our now Prime Minister Theresa May firmly put governance on the political agenda. She vowed to tackle excessive executive pay and called for worker representatives on boards. These bold announcements have made many headlines, and have certainly got the governance community talking, but a few weeks on I wonder whether they are all hammer and no nail.
The latter of these two pledges has been mooted to curb ‘vested interests’ on corporate boards, yet I cannot help but feel that the implications of doing so have not been fully considered. We often talk of board dynamics and the importance of getting it right, yet a new member – there by obligation – has the potential to disrupt high-functioning boards, or have little effect at all. Perhaps another conflict of interest would also be introduced, insofar that directors are currently collectively responsible for all stakeholders, but this would allocate responsibility for employees to just one. This may challenge directors’ duties in our unitary board system.
Critics have claimed that more onerous requirements for corporates, such as May’s pledges, are anti-business and are unhelpful for the City while it is experiencing slow growth. I am inclined to believe the contrary however, that if all businesses are held to the same quality standards of governance, they will be sustainable in the long term and more resistant to future economic instability. We should not run to profit before we can walk with governance.
Even Anthony Hilton in his column this month, 'The eye of the storm', asks us to ‘Spare a thought for those whose life work has been self-regulation and voluntary codes, for the shadows are lengthening over those days’.
New requirements alone will not curb immoral business decisions or the greed of a few executives at the top. It is the culture of big business – discussed in our news analysis 'Reckless risk taking' with regard to UBS and the banking sector – that needs to be addressed. I suspect that it is only over time as new values become embedded, and top teams are refreshed, that we can begin to see some tangible change.