Carillion – an example of governance box-ticking rather than culturally embedding core principles?
Published on Tuesday 13th of February, 2018
With the Company’s demise last month, huge efforts are being made to save jobs, with 6,668 having been saved so far, but the FT recently raised questions about potential corporate governance failures in the build up to Carillion’s collapse:
“How many other supposedly well-run boards are presiding over impending corporate disasters elsewhere?”
This is a good question and concerns now follow over profit warnings from various others. Given an array of governance failures have taken place in recent years, it would suggest that without action, we are likely to see further disasters elsewhere.
The decision to liquidate Carillion has come at a time when all eyes are already on our current corporate governance framework. Perhaps its collapse demonstrates to any sceptics that the FRC’s “fundamental review” of the Governance Code is needed and that the original framework, first devised in 1992, is now lacking in today’s fast-paced and ever-changing world.
Is now the right time to overhaul the framework?
Given we are experiencing vast changes economically, technologically, socially and politically, it’s pivotal the 25-year-old Code is refined to be fit for purpose for whatever the future holds. With Brexit on its way, the UK needs to demonstrate it remains a great place to invest and do business, and that businesses here are held to the highest levels of accountability, ensuring all stakeholder groups are not adversely affected, as in the case of Carillion.
“It is worrying to think the construction company’s board was such a model of good governance. If the line up had been different, would another cast of characters have done any better?”
This is a fair point, but is it simply the characters of a board which determine the destiny of governance effectiveness, or should we all as individuals take responsibility under their overarching guidance? Given large businesses have a disparate workforce, it’s easy to think “what I do in the scheme of things really won’t hurt”, but it does, so we all have the ability to be governance advocates who champion good behaviour and challenge perceptions such as this. However, to achieve this, the tone needs to be set by the board and support given to ensure the rest of the business is sufficiently engaged. By engaged, this must address awareness and understanding levels, how governance is linked to KPIs and in turn pay, which cumulatively help promote strong culturally embedded behaviours.
So, with this in mind, is a new framework the solution?
“The directors ticked all the good governance boxes, yet the contractor still collapsed.”
If we only ever go as far as ticking boxes, then no framework will suffice. We must go beyond box-ticking, because if we don’t, then we can never be sure we’ll not find ourselves in a position like Carillion.
Once the new framework is in place, it proves a great opportunity for all governance professionals collectively to ensure it is embedded, not just at board level, but throughout the business. If we are the ‘conscious of the company’, is it not our responsibility to collaborate with Communications and HR teams to inspire a cultural shift?
As governance professionals, we should be more hands-on with communication campaigns, which would give the creatives more insight and support. If we are trained in the language of governance, should we not help translate it in a meaningful way so that others can understand its benefits and the reasons why conducting business within such framework is best for sustainable, long-term performance?
Have you got a long-term governance communication plan in place?
If not, EXIMIA can help. Our team offers communication design that is based on an intrinsic understanding of governance. We take the technical facts through a creative process, breaking them down across various digital and print mediums to help reach out to employees – to raise awareness, understanding and action.
The FRC is aiming to publish the final version of the new Governance Code by early summer 2018, so there’s no better time to challenge the process and consider the broader picture. Governance is the steady foundation we all rely on, so collectively we need to invest in it.
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Communication design with first-hand corporate experience – bridging the gap between governance know-how and creative communication campaigns.