Diageo, the owner of drink brands such as Jonnie Walker, Guinness and Baileys, has a topped rankings for good corporate governance in the UK.
The Institute of Directors annual ranking, the IoD Good Governance Report, now its third year, revealed Diageo on top followed by Aviva in second and GKN in third.
The IoD said: “The purpose of this project is to reignite the governance debate by leading it away from the compliance approach to corporate governance that has become widespread in recent years. Our novel approach is to combine traditional governance indicators with a measure of the quality of corporate governance as perceived by stakeholders.”
The rankings work by combining the results of stakeholder interviews with objective measures of traditional corporate governance indicators.
In his preface to the report Ken Olisa, deputy chairman of the IoD, said that recent interest in corporate governance had been driven by scandals at Sports Direct and BHS, as well as the mooted listing of Saudi Aramco—Saudi Arabia’s sovereign oil company—on the London Stock Exchange. The events had driven a fresh focus on governance from regulators and politicians, culminating in the prime minister Theresa May’s statement that she wanted to tackle problems in governance to “strengthen people’s faith in a well-regulated free market economy.”
He said: “While not in any way dismissing the importance of addressing that ‘worrying lack of trust’, the IoD’s approach to good governance has a higher-order objective.
“We aren’t in the business of adding to regulation and its inevitable conclusion that one size fits all. Rather, we have set about identifying a set of instrumental factors which every board should seek to optimise in order to achieve competitive advantage for their business.”
Olisa added: “What we, the practitioners, are seeking to achieve is a better understanding of the behavioural engines and levers which enable an effective board to deliver the above objective.
“If the system can be understood, then directors can apply their collective skills and experience in any lawful way they see fit in pursuit of competitive advantage.”
The IoD’s ranking calculates an overall score from five main headings: board effectiveness; audit, risk and external accountability; remuneration and reward; shareholder relations; and stakeholder relations.
Kingfisher came top for board effectiveness; Diageo on audit, risk and external accountability; Rentokil remuneration and reward; Barclays and Royal Mail were equal first for shareholder relations; and Royal Dutch Shell led the way on stakeholder relations.
IoD Good Governance top ten:
1 | Diageo PLC | 837 |
2 | Aviva PLC | 835 |
3 | GKN PLC | 824 |
4 | Barclays PLC | 815 |
5 | Smiths Group PLC | 813 |
6= | Prudential PLC | 808 |
6= | RSA Insurance Group PLC | 808 |
8 | International Consolidated Airlines Group SA | 807 |
9= | InterContinental Hotels Group PLC | 805 |
9= | Compass Group PLC |