Northern Rock crashed on our own door step – it should not be dismissed with a shrug of the shoulders. “Everything was fine until it wasn’t” should not excuse the ineptitude of the many parties involved. The Treasury Committee’s report – ‘The Run on the Rock’ – blamed a fatally flawed business strategy, naïve management and a board of directors asleep at the wheel, along with poor regulation and processes.

A company’s failure is not a theoretical exercise. Real people are hurt by it and real people are supposed to have the opportunity to correct the course. My focus has been on Non-Execs:
– What they were doing
– What they could have done
– Who holds them responsible 

My talk at the Responsible Business webinar – Non-Executives in the Dock –
looked at examples in the private and public sectors. My insights simply relied on facts and official reports.

Government Inquiries are held. Regulators investigate. Reports are prepared. Recommendations are made by them all. Some are even implemented over time. But do they get nearer to better governance? My aim is to open them all up to greater scrutiny, but also recognising there are no easy answers. Regulations exist, but they are not getting the job done and Regulators have been pretty toothless too.

Do we have an unreasonable expectation of Non-Execs?  Is it right to suppose they should bring independent oversight based on broader industry experience. Should they have that virtue of courage to stand up and call matters out when they are wrong? Is it simply Insider or Outsider? I was told by someone in the City that ‘you’d be amazed what Non-Execs do pick up! For every public scandal there are a hundred that get prevented or caught early enough to be brushed under the carpet’.

Should they be brushed under the carpet?

It is clear though that education of Non-Exec’s should be a pre-requisite. Before appointment, how many Non-Execs understand their responsibilities or their rights to open and free (to them) information and guidance from a company’s advisors? Among those who do know how many take advantage of that?

Integrity is important, but so is the ability to identify and pursue problems. Perhaps good practice requires boards to have a mixture. Audit experience, an understanding of shareholders and industry knowledge all spring to mind as desirable.

In reality has there been that much improvement since the 1992 Cadbury Report on corporate governance issued 29 years ago in response to major corporate scandals associated with governance failures including corporate fraud, director mismanagement and the extent to which problems were not revealed by audit reports – examples of Northern Rock, Carillion, Patisserie Valerie, Kids Company, Oxfam, the Catholic Church and others would suggest not.

Tom Harrison – Director, NED