DISCUSSION Good governance: putting the UK business house in order

by Oliver Parry, Institute of Directors

Corporate governance has come a long way since Sir Adrian Cadbury published his groundbreaking review into boardroom best practice in 1992. The UK Corporate Governance Code is now copied and replicated around the world. The comply-or-explain process is used across Europe. And yet, despite the success of the Code, the UK market is still experiencing shocking lapses from HBOS through to Sports Direct. The saga at both of these companies has shown that boards can comply with all of the principles of the Code and yet still experience big governance problems.

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Indeed, as Mark Goyder of Tomorrow’s Company has explained: “The increasing regulatory burden not only takes up boardroom time, but it also makes NEDs nervous and less likely to take risks. NEDs become focused on getting through the regulatory process to discharge their duties and there is then a steady shift of boardroom time away from essentials such as innovation, competitive opportunity and threat, business model, customer trends and, most important, the engagement, motivation and performance of people in the business.”

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