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Boards have become bogged down in governance and must be more future focused

At an event tonight in London, Tomorrow’s Company launches its new report NEDs: Monitors to Partners, which analyses the changes needed in governance to enable companies to focus on creating long-term, sustainable business. In the report, written in consultation with senior UK chairs and directors, Tomorrow’s Company argues that governance has become an industry in itself. 25 years of reforms following scandals have led to a mounting burden placed on boards, with average board packs now over 250 pages and annual reports doubling in length. This is pushing NEDs to focus on risk mitigation and monitoring process, rather than supporting executives as partners in successfully steering the business. In turn, this is contributing to a risk averse approach by many companies with record high dividends and low investment. In its research, Tomorrow’s Company found that while some boards are able to keep their focus on the future, many boards become weighed down by this burden. Tomorrow’s Company highlights the role that all individuals can play in overcoming these problems:

  1. The chair sets the tone as to why his/her board should be different. Company secretaries can help manage the flow of information and reduce the size of board packs. NEDs can focus on supporting and advising executives. Executives can reciprocate this by bringing issues to be discussed, rather than solutions to be approved.

  2. Investors to shift the focus from quarterly results to stewardship, while taking the time to move away from a tick-box assessment of boards.

  3. Government can shift the emphasis from preventing scandals to encouraging long-term investment, sustainability and a greater diversity in governance structures. Laurie Fitzjohn-Sykes, Director of Research at Tomorrow’s Company and author of the report said: “Despite continual reforms and refinements, there is limited evidence that ‘good governance’ is improving outcomes for shareholders and society. The solution to low public trust and productivity, is not yet more governance adding to the caution and compliance burden of boards, but the opposite – encouraging companies to be purpose-driven by investing in the long term.” Supporting quotes from participants: Mike Wilson CBE, Joint Founder & Life President, St James’s Place, said: “The length of board packs, board agendas and the background of many NEDs in finance, legal and compliance contribute to NEDs too often seeing their role as ensuring good corporate governance and risk mitigation. This focus is at the expense of contributing to building a successful and sustainable company.” Dominic Barton, Global Managing Partner, McKinsey & Company, said: “We applaud this report from Tomorrow's Company. Corporate Governance has shifted too much to a 'form over function' model and indeed an industry unto itself. This is a reminder that a key - and important - role of the Board is ensuring the appropriate focus on the long-term interest of the company.” Robert Swannell, Chairman, Marks & Spencer, said: “This paper provides a helpful catalyst to allow Boards to challenge themselves, step back and decide what they are there to do and how they add value. This isn't just more process. It reflects the reality that Boards will have a different focus at different points in the life cycle of a company. The work of the Board will also reflect the capabilities of the Executive team and the dynamic between Chairman/NEDs and CEO. No two companies are alike and governance must address the reality of each individual company. So this paper brings a welcome focus on the dynamic of governance and on form over substance.” -ends- Spokesperson: Laurie Fitzjohn-Sykes, Director of Research, Tomorrow’s Company Charles Perry, Chief Executive, Tomorrow’s Company Contact: Tomorrow’s Company Yolanda Villafuerte Abrego, 02078394040, yolanda@tomorrowscompany.com Notes to Editors: The full report is available for download here: http://www.tomorrowscompany.com/publication/neds-monitors-to-partners/ About Tomorrow’s Company Tomorrow’s Company is an independent non-profit think tank that inspires and enable companies to be a force for good in society. It believes business can create more value for shareholders and society by adopting an approach that focuses on purpose, values, relationships and the long term. It succeeds in its goal by convening business leaders, investors, policymakers and NGOs to develop practical solutions. Tomorrow’s Company was founded in 1995 following the RSA inquiry into the role of business in a changing world. Website: www.tomorrowscompany.com Twitter: @Tomorrows_co Linkedin: https://www.linkedin.com/company-beta/1100238/

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