Could do better
It’s the moment in the year when companies get their annual governance school reports—and the verdict is improvement has been made but there really is still a lot of work to be done.
The Financial Reporting Council (FRC), the UK’s governance watchdog, reports progress on transparency and insight in their disclosures. But there are things to improve.
Reporting on internal controls and risk assessment (about to be placed under a spotlight in a refreshed corporate governance code) has seen little improvement year-on-year. Some companies do well but a “majority” do not. Those companies, the FRC says “fail to demonstrate that sufficiently robust systems, governance and oversight are operating effectively.”
There’s also too much ‘boilerplate” reporting which falls short of stakeholder expectations (twas ever thus).
One positive is that many more companies are being transparent in why they depart from the code (it is, after all, a comply-or-explain code, not comply or be damned) and some reports are beginning to reflect some sterling work on workforce engagement (about time). This seems to pay off most when companies talk to their employees about culture, purpose and values.
Mark Babington , the FRC’s executive director of regulatory standards, says companies need to provide stakeholders with “genuine insight” into governance outcomes.
“This is essential to properly apply the code’s principles and the spirit of ‘comply or explain’. Good corporate governance disclosure builds trust and understanding, and is not just a compliance exercise.”
The whole thing reminds Board Agenda of a school report that said: “a bright student, must spend less time gazing through the window while in class”. Wish we’d listened.
A word in your shell-like
We move on to Shell, or rather the energy company’s battle with environmental campaign group ClientEarth and its claim that company directors failed in their duties under the Companies Act “by failing to adopt and implement an energy transition strategy that aligns with the Paris Agreement”.
The derivative claim was refused permission to go ahead by the High Court. And this week, the Court of Appeal refused to hear the claim.
ClientEarth, as you can imagine, is “deeply disappointed”. Senior lawyer Paul Benson had a warning.
“The High Court confirmed that corporate directors have a duty to manage climate risk, which is significant in itself. While this claim did not pass procedural hurdles, the legal risk facing boards is still very real.” Better keep the law firm’s number handy.
Women are underrepresented in CEO roles, in part because they are off work at the time when their careers are most likely to take off, according to new research.
Matti Keloharju, a prof at Aalto University school of Business in Finland, found that time off work, usually to have a child, explains perhaps a quarter of the gender differences in CEO appointments.
Prof Keloharju says the “gap” in achievement between men and women does ease. But not quickly. “The gap narrows as the children grow up but does not return to pre-childbirth levels during the 10 years following the birth of the first child.” Ten years? Words fail us.