Controlling interest
Many boards are on the back foot in “reacting” to events rather than setting their own agendas, according to a new report from the Institute of Directors (IoD).
The Centre for Corporate Governance at the IoD added that pressure from policymakers, investors and stakeholders has left “board members feeling that they are no longer in control of their organisations”.
Roger Barker, director of policy at the IoD, says regulators need to think of the “cumulative impact” of change on the ability of boards to “apply their own judgement”. But Barker also issues a warning: business may still be working with a trust deficit.
“Now more than ever, boards need to set their own agenda,” says Barker. “Boards are better placed to determine the best interests of their enterprises than regulators or even investors.
“However, if they are to do that successfully, boards must win back the trust of wider society. They need to operate within a professional framework which promotes both governance competence and ethical conduct.
“By actively demonstrating that they can run businesses responsibly, boards can reinforce their key leadership role in modern society.”
And society is waiting. At the beginning of the year, the Edelman Trust Barometer said that business is expected to act on issues such as climate, diversity and equity, and skills training. If boards feel like they’ve lost control, there could be a lot of disappointed people.
Losing face
Executive pay levels are still causing a stir. Last week, the High Pay Centre think tank revealed a study showing that the average FTSE 100 CEO’s pay had risen 16% from 2021 to £3.91m in 2022.
Pay is a much debated issue but some want to call attention to the dangers of continuing with extravagant pay levels. Peter van Veen, corporate governance expert at the ICAEW, an accountancy body, says: “The well-above inflation CEO pay rises outlined in the report have the potential to be a major reputational risk for the companies concerned.”
He adds: “It is extremely worrying that the report outlines that executive pay, along with perceived poor pay and conditions of lower-paid staff—another top reason for reduced trust in business—has led to an overall perception that business has a generally more negative impact on society than a positive one.”
It takes a bean counter to point out how the reputational books are failing to balance.
Prithee: counsel
Company lawyers appear to be feeling a little left out of the current review of the UK Corporate Governance Code.
A story in the Law Society Gazette, a trade mag for briefs, insists lawyers are “shocked” to discover that the new code “fails to mention the crucial role that general counsel (GC) and in-house teams play in decision making, risk management and corporate culture”.
One solution is a line in the code requesting company directors always have access to a GC and a GC should attend all board meetings. Boardrooms really are going to be very crowded indeed.
Paper trail
There’s only one thing we can conclude from the following insight: old-school boards are full of procrastinators.
Academic Irina Alexeyeva at Sweden’s Umea School of Business finds that the “more independent, gender diverse and larger boards tend to file their accounts in a timely fashion”. She adds, after looking at more than 8,000 Swedish companies, that this suggests “board composition considerably influences reporting behaviour in private companies.”
Women get stuff done. Men go for lunch.