Britain’s corporate failures invite a governance revolution – Ian Fraser

Ian Fraser writes:

[I]t is now self-evident to almost everyone apart from those who devised the [governance] codes, the wilfully blind “heads of governance and stewardship” at asset-management firms and governance advisers at “Big Four” accountancy firms that, far from making corporate governance any better in the UK, all this codifying is actually making it worse.

The shameful, scandalous and indeed sometimes criminal behaviour of many FTSE-100 firms in recent years, including BAE Systems, Barclays, BP, Eurasian Natural Resources Corporation, GlaxoSmithKline, HBOS, Kazakhmys, HSBC, Royal Bank of Scotland and Standard Chartered, to name but a few, proves that Britain’s elaborate attempts to codify corporate governance have failed.

This is largely because the Codes have given rise to a shallow “box ticking” culture, in which directors are able to tick the relevant boxes but avoid their true responsibilities. When combined with pressure from a dysfunctional and ultra-short-termist investment community, this has ensured that long-term vision, morality and probity has been casually jettisoned by PLCs.Maybe the time has come to accept defeat, abandon the Code and revert to a more robust use the Companies Acts — perhaps updated marginally — to ensure companies and boards of directors not only behave but also remember what they’re there for.

Source: Britain’s corporate failures invite a governance revolution – Ian Fraser | Ian Fraser

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