Is corporate governance is dead?
Corporate Governance turned up a blind alley some 15 years ago. It lost its initial focus on directors delivering the long-term health of their business and degenerated into a series of compliance-fixated, and short-sighted box-ticking exercises. This irritates even more an already angry and disenchanted public who see the consequent erosion of the credibility of their organizations in the private, public and not-for-profit sectors because of the lack of directoral professionalism.
The many international arguments tend to centre on the poor ethical behaviour of directors. And people can become very irrational when focused on ethics. However, I argue from my experience of Boards and Directors in some 40 countries that the presenting problems are not ethical alone but more based on ignorance of the legal roles of directors coupled with a lack of induction into these roles, and the non-development of Directors’ critical thinking abilities in formulating Policy and developing Strategy. Put another way – Directors do not see their roles as professional or even important.
It was not meant to be thus. Sir Adrian Cadbury published his seminal report On the Financial Aspects of Corporate Governance in the UK in 1992. It was a game-changer and was copied quickly over 400 times in many countries to form the framework for many Corporate Governance Codes. But it had structural flaws, particularly by being so closely associated with accountancy and financial services, its sponsor. This has led to an internationally skewed view of ‘corporate governance’. The Report did not consider seriously the rest of the private sector, let alone the public sector or the not-for-profits. The slavish copying of the initial Code by so many, including the NHS, has made it easier to see corporate governance as a mere box-ticking exercise leading to risk averse ‘compliance’ through non-decision-making.
