Words .....that work

used with discretion and in harmony, to excite, persuade or merely reveal


#CorpGov Is Strategic Thinking: Not An Anorak In Sight

Posted on December 30, 2013 at 3:50 PM

Many, many conversations take place behind closed doors. Hardly a revolutionary insight, but one still worth making in Britain when it comes to all sorts of things concerning business, including corporate governance.

In 2013 my role as a UK-based indepedendent journalist morphed to some extent into something else involving the sharing and retaining of confidences. If it is confidential, I won't turn it into a 'story' so in that sense there are those who would argue I'm not a journalist, or I am a bad one. Obviously, I would disagree.

Having spent a great deal of time this year listening to what people have to say, I haven't always had the time to record 'the story.' This little blog has been silent for too long in December - and for that my apologies to Mike Evans, CEO of my blog sponsor responsible for innovative technology for the global boardroom.

God knows we need it - and watch this space as it becomes clear that cybersecurity is the largest threat to boardrooms in 2014. For once, the UK government may be ahead of the curve.

From all those conversations, it is certainly clear that UK institutional investors intend to make their voices heard in 2014 about the things that concern them about the way boardrooms conduct their business. Top of the agenda is board evaluation and succession planning.

Assessing the evolution of 'comply or explain', the UK regulator, the Financial Reporting Council (FRC), is focusing on the same - you can read more about that here in my blog for Forbes Europe.

Assuming you read that, what I found most interesting about the FT story on Japan's investors adopting a 'comply or explain' code of conduct covering engagement with companies was not the detail - which is still very mild and 'wishy washy' compared to its UK counterpart - but something else.

The FT story quotes Toshiaki Oguchi, executive director of Go Japan, an activist group, as saying "that the Japanese version was remarkable because it started from the assumption that stronger corporate governance could lead to a more vigorous economy." (my emphasis)

It's a great assumption. LGIM, one of Europe's largest institutional asset managers managing £443bn in assets, issued a press briefing recently in which it focused on both cybersecurity and the need for effective board evaluation.

Sacha Sadan, LGIM director corporate governance, is clear that although many businesses have signed up to board evaluation as recommended by the UK Corporate Governance code and the Financial Reporting Council (FRC), it is not yet run professionally enough, and needs to be addressed.

(From my own vantage point, I have commented here before that it seems to me extraordinary that headhunters who fill the boardroom are also allowed to evaluate the performance of those they place there.)

Mr Sadan argues some do it very well - and the FRC is unlikely to get involved in the nitty gritty of which boardroom consultancy a plc uses. But greater transparency and accountability should make a difference - and deter those who see 'board advisory' as a good way of making a buck without bringing anything new to the table.

There also seems to be a new approach among investors and the regulator on 'diversity', the drum that has been banged for almost three years now. In its briefing, LGIM quoted Arnold Donald, CEO, Carnival September 2013 as saying: "The key to business success is innovation and the key to innovation is diversity of thinking. (Boardroom) diversity alone does not guarantee innovation, but it increases the possibility" (my emphasis)

Business still needs to think differently about the time honoured path to its boardrooms, and there are signs that it is beginning to do just that. Babcock International plc, the engineering support services firm, has recently announced that Sky's Jeff Randall is moving from the newsroom to the boardroom.

Now that's a little bit of innovation - and it is also indicative of strategic thinking. 

For corporate governance doesn't really have anything to do with 'anoraks', even if some in the serious business press persist in making that unhelpful correlation.

By now, it should be apparent to everyone that corporate governance is, in fact, strategic thinking for business. My wish for 2014 is for that lightbulb of realisation to remain firmly switched on.

Thank you for reading and a very Happy New Year.

Categories: Investors, Transparency, Measurement