Mind The Gap Between Regret And Blame When It Comes To Governance
"How could a company that was signed off by KPMG as a going concern in Spring 2017 crash into liquidation months later? As borrowing, liabilities and the pension deficit ballooned into the billions, were they working on the assumption that they were 'too big to fail'?."
Watch Parliament TV as the Work and Pensions and Business, Energy and Industrial Strategy Committees question Carillion's former directors. It seems it is now deemed fit and proper for top management to be as regretful as possible when businesses fail, but the leap towards accountability just does not progress, even when questions are asked pushing people in that direction.
Keith Cochrane, who was leading Carillion at the time of the collapse, says its board should have been asking "more probing questions". “Do I wish we’d done something about this sooner? Absolutely, with the benefit of hindsight”, he said. If this were a board game, that's the equivalent of a 'get out of jail' card.
Chairman Philip Green said on Channel 4 News last night that he accepts "responsibility" but not "culpability." The distinction is another carefully chosen use of language. The difference between 'responsibility' and 'culpablity', is guilt. For that, you need moral accountability.
So penitents in a corporate capacity now embrace the 'moral' stance by being as regretful as possible....stopping well short of mea culpa or any talk of giving up financial rewards linked to their role.
A strange thing appears to have happened amidst all the talk in recent years about looking afresh at corporate governance in the UK and making sure that it is fit for purpose. We have heard leading business men and women, regulators and politicians talk up and talk loud on the need to adhere to clearly laid out standards of behaviour, with threatened consequences for those who do not.
Scrutiny has been made public as those who preside over business failures with far-reaching human consequences are hauled in front of parliamentary select committees. And yet this great show of volition when it comes to setting high standards of individual and collective corporate behaviour has no teeth.
Theresa May was not yet Prime Minister when she seized on the platform of worker representation on boards, stunning everyone in the country. It isn't likely to happen for many reasons, but it would be an important step in the right direction. Without some sort of step change, it is hard to see the UK's changes in corporate governance as real headlines, rather than as the small print.
This is exactly what has happened with the decision to act on the excellent and thoughtful Taylor Review, an independent review of modern working practices in the UK by Matthew Taylor, chief executive of the Royal Society of Arts, - as was made clear by Frances O'Grady, head of the Trades Union Congress (TUC) on Twitter this morning.
When it comes to what is needed for better corporate governance, Marilyn Croser, Director of the Corporate Responsibility Coalition, puts it well in a letter to The Guardian on January 22nd: "The collapse of Carillion following the BHS and Sports Direct scandals, indicates a systemic problem with UK corporate governance. The fate of large corporations is a public concern and only wholesale reform will ensure company boards prioritise long-term value creation over short-term profit."
"Under current company law" she writes, "there is no positive obligation on directors to take steps to prevent serious impacts on employees, suppliers, customers, the community or the environment. Rather than tinkering, as proposed in its response to corporate governance green paper, consultation, the government should reform the Companies Act to create an obligation of this kind."
"An obvious way of strengthening corporate decision-making to take into account the interests of wider stakeholders is to put worker representatives on boards. The government must now reconsider its decision not to move ahead with this proposal. At present directors are rarely held to account. Only individual accountability will address this problem. Presiding over serious corporate failings should be a grounds for directors’ disqualification" ends the letter.
The state of pension concerns at Carillion and across UK business - which I covered in the final chapter in a book published by the Centre for Progressive Capitalism last year - should be enough to make changing company law a priority.