The Government's Green Paper on Corporate Governance closes today. EEF has submitted a response which you can read here. Today on the blog we ask - does business need to change?
UK corporate governance is rarely out of the news – parliamentary inquiries, green papers, newspaper headlines - everyone seems to have a view. EEF’s has given it's views by responding to the Government's Green Paper (you can read our submission here) but perhaps we can start at the beginning – what is the problem which we seeking to address?
Why are we talking about Corporate Governance?
It’s easy to gloss over the fact that the UK is one of the most comprehensively regulated countries that a business can operate in. There are already requirements for CSR reporting, annual reporting, a corporate governance code, modern slavery reporting and soon gender pay reporting to name but a few. The problem is not that we don’t have a strong system, or that the vast majority don’t exceed this, it’s the few, who in the PM’s words, are not playing by the rules.
So, what is the problem? The problem, bluntly, is that a very small number of businesses, or owners, have made the headlines with their sharp practice – legal it may well be, but its rightly attracted criticism from, amongst others, politicians and parliamentarians. So, “something must be done”. The examples are well documented in the media – and create a (false) impression is that many businesses are playing fast and loose with pay, employment rights and governance in general.
If then this is the perceived problem, what might be the solution?
Well, perhaps businesses need to tell the public of their contribution - to society, the UK tax base, to their employees and their wider stakeholders. Businesses can be very successfully in selling products, goods, services – but not themselves. Businesses already contribute billions to the UK – in cash and kind, but this rarely makes any headlines. A large bonus for the Chief Executive of a global multi-national on the other hand does.
So, there is job to do for businesses to demonstrate the contribution they already make. And, some tightening of the current corporate governance rules will make the point that shareholders hold ultimate power. So, where shareholders revolt over pay in one year, and executives don’t heed this, then it seems reasonable that in the following year the shareholders should have the final say. There seems nothing unreasonable in this principle.
The all-important workers
Good businesses are good businesses because of the people who work for them. They listen to their workers, support them, encourage them and reward them. They already hear loud and clear the voice of their workers at the highest level – but perhaps we should make it clear that all businesses must do this in a way which suits their business - and as a nudge make them tell us how they have done this.
So – let’s not lose sight of the fact that the UK is already doing well – improvement is always possible, but perhaps we can also find a way to congratulate all those businesses that contribute to UK plc? We need them, now and in the future.