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Corporate governance has been reformed and improved, but recent evidence suggests there is more still to do.
Financial ServicesAs Standard Chartered Bank and HSBC join Barclays in the rogues gallery of banks that have suffered severe failures of corporate governance, the reputation of commercial banks can, surely, only be recovered through fundamental reform of corporate governance rules, and the associated regulatory bodies for the financial services industry.
Other industriesToday’s revelation that Oracle Software will pay $2m (£1.27m) to settle federal civil charges of failing to prevent secret payments in its Indian sales operation and the recent fiasco here in the UK surrounding the inability of G4S to fulfil its contractual obligations to give security for the Olympic Games suggests that corporate governance issues extend to businesses in other industries beyond financial services.
Corporate governance regulation and cultureThere have been number of actions in recent years that should have improved things. In the UK, for example, there have been changes to the regulatory bodies responsible for financial services, but the evidence suggests that there are too many cases of the FSA having to ‘cure’ problems and not having prevented the problems in the first place. Our consulting experience tells us that, in many cases of systems failure, the cause can be attributed to lack of commitment of people to, in this case, the regulatory regime and, therefore, the principles underpinning it. Cleaning up the behaviour of people inside businesses requires significant change to the culture of many corporations. The culture is informed by the values which, in young, small firms are set by the founder and in large, more mature corporations are set by the Board. In both cases, the existence of a culture that allows, or in extreme cases, condones bad practice is a failure of leadership. Reinforcement of the standards expected by society can be addressed, at least partly, by fines and regulation. In this case, the failure of regulation could also be a failure of leadership which, in this case, means political leadership. However, as the financial and political strength of corporations grows alongside their international reach, political failings aren’t always attributable to political leaders. In many countries the ability of national regulation to control global businesses is severely limited. This is often due to the relative political and economic weakness of small nation states relative to large, global corporations. If we take banking as a defined segment of the financial services market, it might be time for national governments to recognise that co-operation towards a unified international corporate governance framework of principles, regulation and enforcement backed up by co-ordinated action from national governments is overdue.
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Body language is often included as part of management development programmes. It’s easy to see why. Telling people that crossed arms indicate resistance to what you are saying seem reasonable based on ‘common sense’. However, as with many favourite topics on training courses, the evidence to support a lot of this stuff is either flimsy or non-existent.