The reform of corporate governance has been a matter for debate for over two decades now, following the publication of the Cadbury Report on governance in 1992. The topic received renewed focus after the 2008 financial crisis when the question was posed – should Audit Committees and Independent Non-Executives on the Board have spotted the failings and if so, could the crisis have been avoided?
Over the years, we have seen persistent themes arise from our work within Audit and the Board practice which echo those conclusions drawn by Tim Copnell, Associate Partner with KPMG’s Audit Committee Institute in the UK in this 2010 article. Even a few years on, we’ve found the insights to be timelessly relevant.
Firstly, introducing exhaustive criteria to select Board members, for example the suggestions of quotas to introduce women onto Boards, the idea of the prerequisite of an MBA, and the push to broaden diversity, can overcomplicate matters. Instead, the a winning combination may be to select Non-Executives with industry expertise and knowledge, who also display the willingness to speak up and question decisions, avoiding groupthink. It is a matter of identifying the right individual to suit the chemistry of the Board and this would be hard to reduce to a check list or percentage.
Secondly, it needs to be reiterated, that good governance is not wholly derived from regulation, but rather driven by the right people instilling the right cultural values from the top of an organisation down through the ranks.