In our post-Brexit business world, U.K. Plc needs every competitive advantage it can find or muster. Improving corporate governance performance and behaviours – so that we have the most professional Boards and Directors in the world – should be at the forefront of any government initiative and consequent legislation. Independent Directorship expert and author Gerry Brown.
Though it claims to be “world-leading” and innovative in its legislation requiring companies to publish pay ratios, Greg Clark’s just published Green Paper to improve the framework of Corporate Governance for business in the U.K. nevertheless remains a badly missed opportunity. At best, the Government has squandered a golden opportunity to build trust and encourage outside investment in the U.K. Plc.
Post-Brexit we need to be seen – rather than just claiming – to have world-leading governance standards, structures and company directors. By focusing on the window-dressing of the transparency in publishing pay ratios, Greg Clark has arguably frittered a fabulous opportunity away by rectifying a single symptom of the problem rather than addressing the wider range of fundamental issues of – to give a few examples – board evaluation, accreditation and training; the rigorous enforcement of current legislation and penalties; ensuring effective shareholder representation or board diversity.
If the benefits of greater transparency – something that the green paper foregrounds as a strong bromide and effective cleans-whiter-than-white behavioural solution – is not to become a contemporary economic canard equivalent to claims made for ‘trickle down economics’ then the government needs to urgently do much more with their transparency metric than they currently propose in their ‘world-leading’ green paper.
With a simple but effective proposal, and with speed and effectiveness to further leverage the competitive advantages transparency confers on behalf of U.K. Plc, the government could easily legislate to introduce annual – publicly published performance assessments and reviews of all board directors including Performance Improvement Plans to improve the effectiveness of Boards.
At a stroke this increased level of transparency would immediately improve board behaviour (in similar fashion to how the threat of pay legislation appears to have temporarily curbed the rate of rise of average executive pay and bonuses over the last year) and significantly reduce the incidence of company scandals. Such legislative action would also show the world that the U.K. Plc was really open for business with high calibre board level staffs heading up some of the best run companies in the world.”
The Independent Director: The Non-Executive Director’s Guide to Effective Board Presence is by Gerry Brown. Published by Palgrave Macmillan.
