Don’t rely on Compliance

Box-ticking executive

The UK has recently suffered the collapse and liquidation of its second biggest construction company and one of its biggest providers of construction and services to the state through the Private Finance Initiative (PFI). Up till this point, Carillion, the UK’s second biggest construction company, passed all the formal tests: unqualified audit reports from KPMG, compliance with the Corporate Governance Code and cooperation with the Stewardship Code. However, analysts have been predicting problems for some time, having analysed its accounts and spoken to its suppliers and customers, and its shares were shorted by hedge funds for several years before its demise.

So what price compliance? This disaster prompted us to look back at the corporate scandals which have led to regulatory responses and to consider, yet again, why these successive regulations have consistently failed to prevent subsequent scandals.

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Toshiba pulls a rabbit out of the hat

Toshiba and the Japanese Stewardship Code, image of Toshiba logo on office building with blog title

We have featured Toshiba several times this year in our new ACG Report, and the twists and turns have been fascinating. The likely end result is both surprising and at the same time unsurprising, though the long term implications for governance could be ground-breaking. This post is taken from the latest issue of the report which is available free to subscribers.

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Kobe and the Japan Codes of Corporate Governance and Stewardship

Kobe Steel is one of the pillars of the Japanese industrial establishment. In a few short weeks in October, its share price suffered a disastrous drop of some 40% following revelations by the company that over some years it had routinely produced fake quality control data. We look at its code of conduct, apply Japan’s Corporate Governance Code and our Golden Rules and suggest measures that should now be taken to stop this happening again.

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What is ESG? Can it really unlock Brand Value?

ESG is now mainstream and holistic Corporate Governance now drives brand value. But exactly what is ESG? We look at its origins in Responsible Investing and the principles thereof, various interpretations of ESG and its evolution towards complete acceptance by the investment community of the effect of holistic corporate governance on sustainability (in the widest sense) and hence brand value.

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Stakeholder engagement and directors’ duties under company law

image of businessman with tablet showing survey results, representing stakeholder engagementWe have written often, and at length, about the imperative of taking a holistic approach to Corporate Governance, and that balancing the interests of primary stakeholders in formulating the Goal of the organisation is key to this. In UK company law, we can see that this is now effectively explicit in the statutory duties of directors.

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Impact Investing

We discussed active versus passive investment in an article last year, but what about impact investment? It comes after socially responsible investment (SRI) and environmentally sound, socially beneficial and excellent governance investment (ESG). Is it more than just another marketing tool for investment managers, and how does it rank in corporate governance compared with traditional investment?

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Australia update: Charities in the Spotlight, the Big 4 Banks and MPs’ “Entitlements”

Australian charity governance in the spotlight - ACG Australia updateOur latest review of corporate governance developments in Australia places charities in the spotlight, following another scandal involving underpayment of so-called “chuggers” (street collectors or “charity muggers”), checks progress in the banking sector since the parliamentary review and comments on the expenses furore that has led to the resignation of the health minister. By Malcolm Sealy, Australia Correspondent.

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Risk Management and Corporate Governance: Topical or Typical?

risk-management

Risk Management is the latest topic to get our Golden Rules treatment, this time with a convenient Infographic. We look at the different types of risk and how our cardinal principles of good corporate governance can guide identification and management of these risks.

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Australia’s Parliament Questions Big Banks

australia-bank-inquiry

On 3 October 2016 a Parliamentary Committee Inquiry, set up by the Liberal Party as a counter to a Labor call for a Royal Commission, began to question all four CEOs of the Big Four Banks (Westpac, ANZ, NAB, Commonwealth), on separate days. Was this a genuine effort to change banking culture or a political box-ticking exercise? Our Australia Correspondent, Malcolm Sealy, discusses the issue.

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Shareholder Value and Corporate Governance

shareholder-valueHas Alfred Rappaport been unfairly judged?

A recent article by Professor Alfred Rappaport in the Financial Times defended his very influential and widely followed philosophy of the primary importance of the pursuit of shareholder value. This has come under increasing criticism in recent years, as the concept of a more balanced stakeholder approach has gained wider acceptance, and particularly as capitalism itself has come under fire since the 2008 financial collapse. So we thought it would be interesting to go back to the source of the controversy and review Prof. Rappaport’s defining book, Creating Shareholder Value, thirty years after its publication, in the light of current views about corporate governance, and see whether we agreed with Prof. Rappaport’s self-justification. 

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