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#CorpGov: A Rose By Any Other Name Would Smell As Sweet

Posted on November 10, 2013 at 10:50 AM
At the heart of all good governance lies integrity.

It was fortunate for South Africa when it emerged from being an unequal and exclusive society onto a path to becoming an equal and inclusive one that it had two people whose actions spoke loudly of their possession of it. Nelson Mandela, released from prison in 1990 found in Mervyn King an architect for the corporate governance codes that were to guide its businesses forward.

Boardrooms today have a great many things to contend with - with cybersecurity and its risks, inconceivable at that time, increasingly at the forefront of challenges to business. Corporate governance continues to evolve, and as it does, it has also in itself become big business.

With the arrival of social media in an age of economic hardship - when everyone has to try that much harder to earn a living - corporate governance and (to my mind its natural partner) 'diversity', has spawned a plethora of expert advisers. The skill now lies in distinguishing the real thing from many a pale imitation.

In the UK, the headhunters were quick to spot the opportunity when they moved from boardroom recruitment to 'boardroom advisory.' Indeed, my first foray into the world of headhunting came when I was headhunted from journalism into a firm that sought to build a niche in that field. It was during a course of interviews with the top 10 institutional investors that I first became very interested in corporate governance and how it worked.

The interviews were meant to be a 'sell' for the firm. As a journalist I was able to pick up the phone and persuade the heads of all the institutional investors to give me their time. What the interviews really achieved was to sell me on corporate governance. I left the firm after only a few months, but in the process I had made contact with the Dean's office at London Business School - and the rest is in my CV.

A great many people are now interested in governance, and the 'women on boards' debate because of the money to be made out of it. Talking about corporate governance appears to be seen by many as a pre-requisite to becoming a non-executive director.

Certainly, many of the women at 'women on board' events in the UK since Lord Davies launched his review (and I started this blog) have attended primarily as a means of finding out how they can get a piece of the action. Fair enough.

Social media - and Twitter in particular - is a rich forum for the exchange of thoughts on corporate governance. It is also the best platform for self-promotion.

I am a keen observer. So here's what I have noticed. People who are widely regarded as corporate governance 'gurus'- and hold or aspire to hold NED positions-  are not always that interested in the real concerns of corporate governance, which must always come back to integrity.

They do not comment on major developments - such as the shocking and long drawn-out corporate governance tales around Bumi plc and Eurasian Natural Resources Corporation (ENRC) for example - for their own reasons. Perhaps it is due to lack of knowledge. But it's still odd, as those two UK listed companies have been the best example recently of the importance of sound judgement in corporate governance. 

Margaret Heffernan is brilliant on the subject of 'Willful Blindness.' I would call such lack of comment 'willful silence'.

It is still the case that it is a great deal easier to get onto a UK plc board once you have already been appointed to a UK plc board. In the same way, in 2013  sadly it is easier  with social media to make people think you have something to add to corporate governance if you have a tide of 'followers' behind you - regardless of any real value in your contribution. 

It is something to watch out for when the boardroom confronts social media. In my view, the number of 'followers' is almost an irrelevance as long as the right message gets out. If you can engage people, even better.

The problem, as an intelligent woman said to me the other day, is that "no one really reads anything any more." I'm afraid it's true. So many people pay to be seen carrying the Financial Times around, but don't actually take the time to read it. So many headhunters and advisory offices are graced with pristine unopened copies of the FTto impress their clients. 

And absolutely everyone wants to be in the FT. Headhunters in the City have known for ages that the best way to get quoted - whether by efinancialnews or the FT - is to conduct a 'survey'. It gives journalists who are pressed for time a quick story, particularly if they are offered an 'exclusive.' And that is how we get a situation where a 'not quite the case' story becomes gospel - even before it starts doing the rounds on Twitter.

So when it comes to coporate governance, I say be careful with your judgement. Not everyone equates it with integrity - for far more people than not, it is equated with money in the bank. And these days everyone is so very busy trying to make sure they have enough that they certainly don't have time to read much...

If you are still with me, here's a fact at last :  the next area of concern to be flagged up by UK institiutional investors will be boardroom evaluation. The rules around how it is managed, monitored and reported, are still open to abuse. For a start, in the UK headhunters are permitted to evaluate boards on which they have placed non-executive directors - to my mind a clear conflict of interest. 

As is their way, UK  investors will raise concerns but not be prescriptive. 

Speaking to journalists last week Sacha Sadan, director of corporate governance at Legal & General Investment Management said: "We have seen significant improvements in board diversity and engagement, but there is still further to go. We are increasingly focused on effective board reviews; improving the disclosure on reviews and greater transparency around how boards plan to tackle the action points highlighted by reviews."(my emphasis)

Now that's an interesting development in corporate governance. More soon. Have a great week.

Categories: Scrutiny, Ethics, Governance