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Staying competitive is in sharp focus for the United Kingdom in a post-Brexit world. The saga unfolding at NMC Health, a FTSE100 business, was well outlined in an opinion piece in the Financial Times earlier this week. Those who remember the outrage surrounding behaviour at Eurasian Natural Resources Corporation (ENRC) for example – and the negative publicity around the premium listing, will point to the tightening of the governance rules in response as decisive action taken.
This week, as NMC Health hits the deadlines on a daily basis and its share price gyrates with speculation, the premium listing standards are again in the spotlight. “UK regulators have already shown a recent willingness to water down standards to attract overseas business…. NMC Health’s issues are a timely reminder of just how badly things can go wrong” writes Brooke Masters in the FT. Anyone who cares about corporate governance will be watching closely.
Reputation And Regulation
The spotlight on regulation as a means of maintaining high standards has also broadened to the financial services industry this week, with news that American banker Jes Staley, CEO of Barclays, is being investigated by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority over his links to disgraced financier Jeffrey Epstein.
"The relationship between Mr Staley and Mr Epstein was the subject of an enquiry from the Financial Conduct Authority to which the Company responded," Barclays said in a statement." It went on to say that “The FCA... subsequently commenced an investigation, which is ongoing, into Mr Staley's characterisation to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company's response to the FCA." The focus of the investigation is whether that relationship was properly disclosed to the bank and regulators, according to CNN coverage.
The Me Too movement was first started in 2006, but it became a global phenomenon in 2017 when the #MeToo was adopted following the sexual allegations against Mr Epstein. It is striking in what a short period of time the public outcry on social media, a medium that has often been derided in boardrooms filled with people over a certain age, has heightened awareness, and is contributing to social change. Add in the growing demands for a new focus from business on the concerns among its stakeholders – not just its shareholders – and the boardroom’s need to focus on the factors that contribute to reputation in 2020 gains urgency.
Regulation And Accounting
Earlier this month the UK’s accounting regulator, the Financial Reporting Council (FRC) announced an expansion of its enforcement powers and staff numbers ahead of its transformation into a new regulatory body. The details were set out in its draft plan and budget and published for consultation. Formal legislation is expected to be introduced to create ARGA, the new regulator, this year.
The FRC has also this week published joint letters for accountants and auditors with information regarding auditing, accounting and corporate reporting standards during the transition period following the UK’s exit from the EU.
Climate Risk
This edition of Governance Watch is being written against the backdrop of a Cabinet reshuffle that has seen the promotion of Alok Sharma MP from international development secretary to business secretary. He will also be in charge of the COP26 climate change summit in November, whether in Glasgow as planned, or London. It is a critical opportunity for the UK to show leadership on climate action.
Acting decisively on climate risk and the climate emergency is also a chance for business to restore trust, as I recently suggested on my blog Board Talk. Among the oil and gas companies, BP under the new leadership of CEO Bernard Looney seems to have appreciated that as truth, as the company announced it had “set a new ambition to become a net zero company by 2050 or sooner, and to help the world get to net zero.”
“The world’s carbon budget is finite and running out fast; we need a rapid transition to net zero. We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner. To deliver that, trillions of dollars will need to be invested in replumbing and rewiring the world’s energy system. It will require nothing short of reimagining energy as we know it” said Mr Looney.
“This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change – this is the right thing for the world and for BP” he added.
For better corporate and stakeholder governance, boardrooms across corporate sectors must embrace the need for change on multiple fronts.
Gender Diversity
The initiatives have stepped up to the challenge of better gender diversity in positions of power and leadership across business, with a growing emphasis on mentoring, sponsorship and practical action. Women in leadership roles send a clear message on gender equality, as do the men who support them.
Last week Amber Rudd, the former Minister for Women and Equalities wrote in The Times: “‘Surely we just want the best candidate for the job,’ is the typical response when you point out the need for more women at the top of politics. Such a reasonable position... who wants the second or even third-best candidate in a role? And yet if every time the so-called best candidate is a man, again it has to be challenged. It can’t be coincidence every time. The truth is that the overlooked woman often is the best person for the role. She’s not the first choice, because she’s not in the gang.”
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