Governance Watch - Issue 37

by Dina Medland in London

Social Value

In the current debate in the UK around how to achieve better corporate governance at a challenging time and amid changing business and workplace models in the face of technological transformation, there is a concept that is returning to the forefront - ‘social value.’ This week the UK government returned to the Social Value Act of 2013, extending its requirements in central government to ensure all major procurements explicitly evaluate social value where appropriate, rather than just ‘consider’ it. It comes after the Carillion collapse, which offers examples of the failure of governance on every level.

Some £200 billion is spent every year in the UK on private companies providing public services. Now the government says it will use its purchasing power to challenge its larger suppliers to do better on a variety of fronts such as equality and diversity. They are going to be asked to provide action plans and hard data on how they intend to address key social issues and disparities – discussed further in my blog Board Talk.

"If we are to build a fairer society, in which the public has greater trust in businesses not just to make a profit, but also to play a responsible role in society, then we must use the power of the public sector to lead the way" said David Lidington Minister for the Cabinet Office, in an early release of an intended speech at a think-tank in London. 

The changes are also intended to reduce the complexity and cost in bidding for contracts, allowing a wider range of SMEs in. The CBI responded positively to the announcement, noting that the collapse of Carillion was “a warning of the dangers of short-termism in public contracts.”

This renewed emphasis on social value by a UK government that has stressed a commitment to a more ‘responsible capitalism’ is a way of sending ripples through the supply chain, forcing it to look hard at the relationship between business and society.

Women on Boards

More women than ever before are on the boards of the UK’s largest companies but they still have some way to go to meet the target of 33% women by 2020, according to new data released today (eds Wednesday 27) to mark the halfway point of the government-backed Hampton-Alexander review.

It aims to ensure that talented women at the top of business are recognised, promoted and rewarded.  Some 305 positions - 29% of FTSE 100 board positions - are now held by women, up from 12.5% in 2011. Today’s statistics show that if progress matches the same gains made over the last three years, then FTSE 100 companies are on track to meet the 2020 target, said the government.

However, an announcement also revealed that while the number of women on boards has increased to 25.5% in FTSE 350 companies, around 40% of all appointments need to go to women in the next two years for the FTSE 350 to achieve the 33% target. 

The team behind the Hampton-Alexander review has not been shy in sharing some of the astonishingly sexist reasons given for not entertaining the notion of women on boards. One might think that it has to be getting very uncomfortable to be sitting on an all-male board in 2018. But as Melanie Richards Deputy Chair at KPMG, sponsor of the Review said: “In order to achieve these ambitious targets significant change is required, which will not happen overnight. It will take systematic focus on all aspects of recruitment and retention.”

“The progression of women remains key, coupled with an emphasis on creating environments in which talent can thrive, leadership stereotypes are challenged and individuals are valued for their skills and capabilities” she added.

Bridging the gender pay gap could add £150 billion to the UK economy by 2025, says the government’s announcement – and yet we are still struggling to convince those who are meant to be business savvy. In fast-changing times we face multiple new challenges, and as we go into July, also look forward to the imminent release of a revised UK corporate governance code. 

Artificial Intelligence

Technological transformation has already proven to be a challenge for many businesses, but the rise of artificial intelligence promises to bring new and complicated ones for both business and society. Research suggests that artificial intelligence could add £654 billion to the UK economy by 2035. This week the UK government announced appointments to a new Office for Artificial Intelligence as the country looks to cement its place as a world leader in this fast-growing technology.

Tabitha Goldstaub is the chair and spokesperson of the AI Council, a new industry body tasked with increasing growth in the AI sector and promoting its adoption in other sectors of the economy. She is the co-founder of AI company CognitionX, an online platform which provides companies with information and access to AI experts to boost their businesses, and runs CogX, one of the largest gatherings of AI experts in the world.

Her perspective as an AI expert but also as a woman will be invaluable to the new Centre for Data Ethics and Innovation. An interview with her published in May in the Evening Standard said: “Goldstaub compares AI to a child, learning from what it hears. ‘If you train AI based on racist, sexist information, you can’t be surprised that it becomes racist and sexist.’ 

In this critical area affecting business and society, we have an opportunity to start again, by defining the ethics and behaviour we value. 

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