An important part of the puzzle to build public trust
Carolyn Fairbairn, Director General of the CBI, writes:
The UK’s corporate governance framework is admired globally as the ‘gold standard’. The UK is rightly recognised as a world leader in corporate governance. It’s an asset that draws inward investment, which is vital for our productivity growth.
Good corporate governance ensures that businesses are focused on the long-term, have effective decision making and are held to account for their actions. As corporate governance evolves the business community is engaging constructively, particularly in the fresh conversations about reward and reputation. Partnership like this, to shape reform, is a clear sign of the value which business places on the approach which has been embedded in this country over time.
The Code, which is built around 'comply or explain' good practice, regular, and comprehensive reporting and effective enforcement by shareholders – is delivering good outcomes. The Code and the culture of comply or explain have worked well, driving behaviour change more effortlessly than regulation. All companies are different, so maintaining the right degree of flexibility through the Code, has encouraged a race to the top.
But the world is changing, and the UK faces pressing challenges - from shaping our global future to building an industrial strategy that unlocks growth and prosperity right across the UK. It has never been more important that government, business and society work together to set out a shared vision for delivering prosperity. To be successful, it must be underpinned by trust and understanding.
Public trust won’t be delivered via a single corporate governance mechanism, although the UK Code provides a good foundation for our largest businesses to build on. Good governance has never been a more critical part of the jigsaw in rebuilding trust, but as expectations change firms need to go further and act on issues which the Code simply can’t address. We expect more from our business leaders 25 years on. Individuals want to feel a connection with the CEOs and executive directors running UK industry. People want to see behaviours that deliver prosperity for employees and wider society.
Meeting the changing expectations of shareholders, customers or employees means focusing on the basic business behaviour people care most about– treating employees well. This requires action to deliver fair pay but also to create workplaces where people feel safe, respected and where they can be themselves. The FRC plays a vital role in ensuring that the Code continues to adapt and evolve and its importance looks set to grow even further in the years ahead.