11 December 2017
Our community reflects on the previous year in governance, and considers what the future holds
The UK government’s ongoing review of corporate governance and the uncertainty around Brexit have made this year a turbulent one for those in the field.
We wanted our Governance and Compliance/Core audience to take a round view, and asked whether corporate governance standards had improved in 2017. Only 26% said yes, while 28% said no, and 46% were undecided.
‘I am not sure if more regulation and reporting have improved standards,’ one person said. ‘And I worry about the effect of Brexit and the risk of the UK becoming a low tax and unregulated haven.’
Another said: ‘Expectations were high at the start of the year following Theresa May heralding corporate governance and responsibility ... as part of her leadership bid. It was therefore disappointing when the Queen’s speech failed to include such reform as part of the agenda and then receiving what can only be described as a “diluted” set of proposals in August.’
Not everyone was so pessimistic, with one person saying: ‘Standards are and have always been high, and the model we have is strong, well-respected and followed across the world. That said, we do appear to be at a turning point and it will be interesting to see how 2018 develops.’
The year has seen several major governance stories make national headlines. Responses highlighted incidents such as the personnel changes at London Stock Exchange, Barclays CEO Jes Staley trying to uncover a whistleblower’s identity, and the FRC’s decision not to pursue PwC for its Tesco audit.
Sexual misconduct also featured heavily. ‘I think the most impactful event has been the stories of sexual abuse, which had taken place in large organisations that had not provided the environment where reports are taken seriously,’ one person said.
“We do appear to be at a turning point and it will be interesting to see how 2018 develops”
Those in governance have taken various lessons from this year, both from the wider agenda and personal experience. One person replied: ‘Governance seems only to be applicable to the smaller entities as the larger entities merely pay fines and continue.’
In a similar vein, another said: ‘Governance failures usually happen within the subsidiary structure of a large business, but all governance focus tends to be at the main board level. Is the focus really on the right area?’
One person flagged ‘the growing emphasis on stakeholders in general, rather than just shareholders’. ICSA published new guidance to this effect earlier this year.
‘The saga of the Paradise Papers shows that many of the large multinationals can get round tax or corporate governance rules by employing expensive lawyers and accountants,’ another respondent said. ‘Governments need to plug the loopholes.’
One response gloomily argued: ‘The situation with investors, proxy agents and voting is not going to get any simpler. I think we are stuck with it, which is a pity.’
‘[I learnt] that government and regulators have no real interest in the competitiveness of UK business, just in piling on more and more time-consuming regulation that adds little in a market where standards are already very high,’ said another.
Despite these complaints, survey respondents were optimistic about next year. Some 60% believe that UK corporate governance will improve over the next few years, with 10% saying the opposite, and the remainder unsure.
‘I genuinely believe that most directors and senior managers want to do the right thing,’ one person said. ‘Deliberate avoidance of the rules is rare, especially within the listed community.’ Unsurprisingly, the UK’s separation from the EU featured, with one person saying: ‘It will be interesting to see how corporate governance develops post Brexit.
‘While a strong and well respected governance regime might be seen by some as providing a competitive advantage when operating within the UK, onerous regulations, reporting requirements and enhanced powers of enforcement might be another reason for companies taking their operations to other jurisdictions.’
If you are a company secretary or governance professional at a leading UK business, and you would like to take part in or comment on future surveys, email email@example.com