CQI welcomes 2017 Good Governance Report

• FTSE 100 ranks positively but debate should be widened
• No correlation between company size and effective corporate governance
• Potential link between emerging sectors (IT) and poor governance needs investigation
• Bell Pottinger and Uber scandals cited by CQI as clear examples of governance ‘failure’

The Chartered Quality Institute has welcomed the 2017 Corporate Governance Report and has called for a wide-ranging governance debate across companies of all sectors and sizes.

We are proud to be sponsors of the Good Governance Report and to have taken an active role in shaping the methodology of the Good Governance Index.

Estelle Clark, CQI’s Director of Policy

The 2017 report ranks the FTSE 100 across 47 different governance indicators, in categories ranging from board effectiveness, audit and risk, remuneration and reward, shareholder relations and wider stakeholder relations.

Estelle Clark, Director of Policy at the Chartered Quality Institute commented: “We are proud to be sponsors of the Good Governance Report and to have taken an active role in shaping the methodology of the Good Governance Index.”

“It is important to say that, in our opinion, the UK’s largest companies are very well run in terms of its corporate governance, but we must now extend the debate into the FTSE 250, into private companies and even public sector organisations and SMEs. The report clearly shows that there is no correlation between company size and effective corporate governance, which demonstrates that governance is not a matter of resource but of culture and will.”

Mrs Clark believes that the report also challenges the assumption that corporate governance is solely a financial issue. “Corporate governance is much more than the narrow issue of executive pay and the misuse of zero hours contracts. Companies with potential governance issues will not solely find the remedy in the audit and remuneration committee.”

Society’s view of what constitutes good governance is changing, moving away from the narrow definition of financial performance towards a broader definition that takes into account an organisation’s impact on all its stakeholders. The 2017 Good Governance Report has included measures of whether a company is a signatory of the UN Global Compact and the Prompt Payment Code, for example.

Estelle Clark, CQI’s Director of Policy

She continued: “Society’s view of what constitutes good governance is changing, moving away from the narrow definition of financial performance towards a broader definition that takes into account an organisation’s impact on all its stakeholders. The 2017 Good Governance Report has included measures of whether a company is a signatory of the UN Global Compact and the Prompt Payment Code, for example.”

Mrs Clark believes the challenge facing many organisations lies in operational governance below board level. “A number of the key indicators in the report relate to the ability of organisations to take the aims and ambitions of the board down into the body of the organisation. High profile operational governance failures, such as Bell Pottinger and the Tesco horsemeat scandal occurred without board approval, but have been immensely damaging nonetheless.” 

The report also hints at differences in governance scoring between sectors. “Information technology scores poorly in relation to other sectors. Whilst the sample size is too small to enable us to draw robust conclusions the results do merit further investigation. My concern is that emerging technology sectors do not regard robust corporate governance practices as being sufficiently important for their business models, as the scandals involving Uber over recent months would indicate.”

Mrs Clark concluded: “We want the 2017 Good Governance Report to be the spark that encourages companies and organisations to embrace and debate governance at all levels.”