IOD slams tick-box approach to good governance

The UK’s current approach to identifying what makes for good governance is flawed, according to a new report – The Great Governance Debate – Towards a Good Governance Index for Listed Companies – by the Institute of Directors (IOD).

Ken Olisa, chairman of the advisory panel for the report, warned that it was wrong to rely on regulators, whose focus is inevitably on compliance, to improve governance at the UK’s biggest companies: “Identifying symptoms of governance failures, and then drawing up check lists to eradicate them leaves us in the position of always fighting the last battle. The financial crisis was not caused by a lack of rules, it was caused by behaviour which was clearly egregious to any outside observer.

"Unfortunately the UK seems to have learned little since the crisis, sticking to a prescriptive set of attributes aimed at creating the cardboard cut-out perfect company.”

One of the key findings of the research is that no one factor dictates whether a company is well-run. “It is simply not correct for a company to say that because they have ticked certain boxes, they show good governance,” said Olisa.

“Now is the time for some bold thinking on how we define and measure governance, including the recognition that it is essentially an organic process involving the interaction of groups of people.”

Further information: www.iod.com