by Dina Medland in London
There is irony in the timing of a £500,000 fine levied on Facebook today by the UK Information Commissioner’s Office (ICO) for two breaches of the Data Protection Act in the scandal involving Cambridge Analytica. The breaches occurred before the latest European General Data Protection (GDPR) came into effect in May, therefore the £500,000 cap is one set by the UK’s Data Protection Act 1998.
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.
Gender Pay Gap
It is clearer than ever that for change to take place on gender equality, we need to have women in leadership positions. Nicky Morgan, the Conservative MP for Loughborough and the first female chair of the Commons Treasury select committee, made her astonishment at the gender pay gap in financial services public in an opinion piece in The Guardian, when she outlined next steps for the Women in Finance inquiry. Now we have its report, which finds ‘alpha male culture’ to be the main reason women don’t want to work in senior management in this industry.
Conflict of interest
It’s a recurring theme, and one that needs urgently to be addressed to resolve the many issues around better corporate governance in the United Kingdom. To even attempt to talk about ‘restoring trust in business’ without doing that appears to demonstrate deep underlying commitment to the maintenance of the status quo.
Carillion: The Fall Out
There’s a limit, surely, to how often you can plead an exception to the rule when assessing whether something is fit for purpose. When the ‘rule’: in this case, ‘best practice’ in the running a UK listed business adhering to highly esteemed standards of corporate governance, appears to have been ignored more than once within a few years, it’s time to re-think the components of that best practice.
Data and Governance
Events in the last week across the public and private sectors in the UK have made it quite clear that major issues with technological transformation and the handling of data are not being dealt with from a governance perspective.
The accuracy of the numbers in company reports lies at the heart of the corporate governance of any business. Institutional investors and shareholders burnt by unexpected company revelations will have welcomed the news that the UK government has just launched an independent review of the accountancy watchdog the Financial Reporting Council (FRC), to be completed by the end of the year.
Gender Pay Gap
It was quite dramatic in the way it was reported in the UK media, but it came as no surprise. As the midnight deadline – set eight years after the law was tabled to compel companies across the country to reveal the extent of the difference between what men and women are paid – came and went, we learnt that women are paid a median hourly rate that is on average 9.7% less than that given to male colleagues.
It is a little difficult to consider something to be a ‘radical’ idea when it was first proposed seven years ago, in the immediate shadow of the financial crisis – to no avail. A snapshot of business media headlines cast a light on some of the complexities as well as the powerful forces at work that can prevent truly radical ideas from becoming reality.
In 2018, International Women’s Day turns a spotlight on the need for better corporate governance as never before. It is about dealing with inequality, and the gender pay gap, about ending discrimination and focusing on the lack of opportunity for women across business, about recognising double standards when it comes to progression, about remembering the importance of reputation, and more.
Many of the revisions and proposed revisions to the UK corporate governance code have been about closer scrutiny for accountability and to raise the bar on standards of behaviour - as have moves on regulation.
This week in Britain we celebrated the centenary of women’s suffrage and (some) women getting the vote. For those of us who have been on social media for years it was also a moment to note how things have changed. Whereas Twitter used to be a useful disruptive tool for the relatively few, it is now a place full of megaphones and businesses and government departments too, who are adept at using it to roll out the marketing and the ‘thunderclaps.’ But who could be churlish about cheerleading for the suffragettes in grim grey February?
#TimesUp And Reputation
Boardrooms all over the world are having to come to grips quickly with the wave of female anger that has been unleashed as women unite to tell their stories of sexual harassment and abuse in the workplace. The #MeToo on Twitter - representing a ‘hands up’ by those who relayed their experience of sexual predators – was fast followed by #TimesUp after Hollywood came together in a bid to exorcise the sexual workplace ethos now associated with Harvey Weinstein.
Audit, Advice, Governance – And Giant Squids
A warning bell rang out last week with media headlines around audit, consultancy, legal services and governance. The Securities and Exchange Board of India (Sebi), the country’s securities regulator, banned global accountancy firm PwC from auditing listed companies in the country for two years after failing to spot a $1.7bn fraud at Satyam Computer Services. “The order comes nine years after the scam at Satyam Computer Services came to light and after two failed attempts by PwC to settle the case through the consent mechanism” wrote Live Mint.
As the year comes to a close, the business media headlines offer clear warning of the need to keep a close eye on the human dimensions of better corporate governance in the challenging environment around Brexit.
The UK’s corporate governance watchdog, the Financial Reporting Council (FRC) on December 5th revealed its proposals for a revised Corporate Governance Code and as promised, it is “shorter and sharper.” I covered the release in my blog Board Talk with the headline UK Looks To The Future With New Corporate Governance Code.
Good corporate governance requires transparency. In South Africa, the latest corporate governance code or King 1V, has put transparency at its heart. By contrast, we talk about transparency in corporate governance in the UK, but we keep coming up against walls of silence. Knocking on such a wall may well reveal that it is, in fact, a door. But it is firmly shut because the powers that be think that it’s “best.”
CORPORATE GOVERNANCE: THE ESSENCE OF A BUSINESS
The demands of rapid technological transformation are casting fresh light on the urgent need for every business to be able to ‘join the dots’ into a clear line on how it functions on multiple fronts through its own corporate governance.
On a fundamental level, good governance is about good behaviour, and conduct contributes to culture – whether it is business culture, or what is considered acceptable in civil society. In Britain, in corporate governance circles we talk about the need to ‘tone from the top’, with the implication being that those in leadership roles set an example by their behaviour. But when the media headlines are full of revelations about sexual harassment in the corridors of political power, and the country has a female Prime Minister, it all starts to get interesting in terms of the winds of change.
The mutterings have been getting louder since the UK regulator the Financial Conduct Authority first proposed changing the premium listing rules to entice Saudi Aramco to the London market. The pretence of its consideration as a general rule change for ‘state-owned companies’ evaporated even as the announcement was made and hit the media headlines.
'Trust' is a word we have heard a lot of in Britain since the 2008 financial crisis. It has been commonly uttered and muttered by senior names in business, analysed and spun by corporate governance experts, corporate communications, consultancies, think-tanks and politicians. It is well-established as a subject that commands attention, inspires conferences and events, and is an essential component of the relationship between business and society.
Audit and Regulation
The reprieve of KPMG, cleared of misconduct by the audit watchdog the Financial Reporting Council (FRC) in relation to its work for the UK lender HBOS will not go unmarked. It is likely to take its toll in the ongoing battle for public trust in the financial services sector and in those responsible for its regulation.
Reputation, Reputation, Reputation
What a nasty shock for the UK’s publicly listed companies. Those they entrust to help tell (and sell) their stories to the world don’t all operate with the same moral compass, it seems. Anyone who thought it was like casually looking into a mirror and then being reflected on with added glory will be reconsidering. No, it’s potentially downright dangerous, this vast corporate expenditure on public relations, or #PR.
All UK plc boardrooms should be watching carefully. Pensions keep coming up in the headlines and the stories rarely reflect well on the businesses concerned. They are increasingly being viewed as a corporate governance issue, and from there it is a small leap to reputation.
Appointments and conflicts
There are so many good corporate governance reasons to read this story with interest.
The Bank of England has created a new role of ‘conflicts officer’ in the wake of the events resulting in the resignation of its Deputy Governor, Charlotte Hogg. I covered that story at the time here, on Forbes.
Regulation and Accountability
It has been an eventful fortnight in UK financial regulation, spewing food for thought on a whole spate of issues around accountability and trust, and their role in better corporate governance.
Almost exactly nine months ago Andrew Bailey, CEO of the UK regulator the Financial Conduct Authority (FCA), spoke out for the first time in the media via an opinion piece in The Guardian to firms that were not applying the senior managers regime that had been in place since March 2016.
One might think that gender diversity could be the easiest component to achieve of any bid to get true cognitive diversity around a boardroom table. But, despite a great deal of effort in the last six years from the U.K. government, CBI support, and cheerleading from a plethora of independent bodies - all well supported by coverage from the mainstream British business media - one sad fact remains true: progress on gender diversity in U.K. boardrooms seems to stall whenever it thinks nobody is watching.
This is not the place to dwell on ‘why is that, exactly?’ But it is a good place to ask what it is that needs to change.
Corporate Governance and Pensions
Like a persistent hum in the background, issues around company pensions and corporate governance keep popping up in media headlines. In part, we have Sir Philip Green and the sorry tale of BHS to thank for that.
What on earth, you might well ask, is a ‘reputational deficit’? You would have to ask Uber board member Bill Gurley, who used the term to describe the state of “what is still Silicon Valley’s most successful start-up” as described by the Financial Times. He told the paper: “It is going to take us a while to get out of this” when referring to the mess the company finds itself in after revelations of endemic sexism and a fair amount of hubris within its managerial ranks.
There is only one story here this week, because it covers so many issues of concern to good corporate governance in business at one fell swoop.