The UK must avoid a “race to the bottom” in its corporate governance after this week’s general election, according to one of the country’s leading voices on corporate decision-making.

Sara Drake, chief executive of the Chartered Governance Institute UK & Ireland, delivered the warning as she opened the organisation’s annual conference in London. She added that governance will have a significant role to play in any “growth” policy programme pursued by an incoming government.

Drake expressed support for the UK’s current corporate governance arrangements, which have been under pressure from many sides for being a drag on competitiveness and “standing in the way of growth”.

Drake said: “We need to make the case more strongly for the promotion of our governance regime as an asset of UK plc, one which enhances our reputation and attracts investment. We must resist a race to the bottom.”

‘Growing the economy to pay for change’

Looking beyond the election result, Drake also highlighted the importance of governance in government decision-making and management. “Within a tight fiscal environment the emphasis is on growing the economy to pay for change. And governance has a strong role to play,” she said.

“The impact of poor governance on public life is profound. It holds back Britain’s economic growth and has led to billions of public money being wasted on poorly conceived, poorly managed projects in recent years.

“It has contributed to the loss of trust in our political system.

“Today, I’m urging the incoming government to take action to turn around weak financial management of major government projects, to reform the civil service to instil greater accountability and improved cross departmental policymaking.”

She added: “New ministers must not only consider their policy goals, but also how they will deliver them within their departments, how they will make good decisions and oversee progress.”

She said the UK government could “not afford” to ignore the link between “effective governance” and “effective decision-making”.

Rival parties quiet on governance

The parties competing in the general election have little to say about governance, while the election comes in a week when the Institute of Directors reported that economic confidence among business leaders has hit a four-month low.

Manifestos have contained little about corporate governance, although the LibDems have called for a rewrite of section 172 of the Companies Act, the class that contains directors’ duties.

But despite a five-year debate about major reforms to audit, the manifestos were silent on the topic.

This week the High Pay Centre, a think tank, said the documents made only “tepid” references to governance and key issues such as executive pay.

Though it adds: “The 14 years of Tory rule have actually seen some reasonably enlightened moves on corporate governance, including the introduction of shareholder ‘say on pay’, pay ratio reporting requirements and better reporting of directors’ responsibilities to workers, suppliers, customers and other stakeholders as outlined in section 172 of the Companies Act.”

However, last year, the Tories U-turned on new reporting requirements and failed to push ahead with the legal changes needed to create a new audit and governance regulator with boosted powers.

The IoD has called for the section 172 to be reformed and for a renewal of the audit reform agenda.

A new government will be in place by the end of this week. Only then will the future governance agenda begin to emerge.