Monday, 2 February 2009

When will they learn?

When will the Government learn that the financial and banking industry needs a fundamental overhaul , starting with its governance. Who were the people sitting as non- executives on the Banks and hedge fund Boards? Were they exercising proper scrutiny? Or were they encouraging the bad practice that has now ruined our economy ?

The Government now has the chance ,through its ownership of shares, to insist on a different approach to governance. Are they? Clearly not . I read today that the Government have appointed their 2 non executives to the Board of Lloyds-TSB Bank . And who are they ? Well ; the usual suspects ! Tony Watson , who has retired as head of the Hermes pension management fund , and Tim Ryan , CEO of the US Securities Industry and Financial Markets Association . Does this fill you with confidence that we will now have the level of non executive scrutiny we need? This is a bad decision . We should have had people appointed to guarantee proper accountability and who are not drawn from the banking or financial world. . People to clean out the stables. To end the culture of greed in the way these people remunerate themselves . To end the bonus culture. Do you think these 2 will do that? I await their response to the Blog .

Some 6 years ago the Government established the Higgs review into Corporate governance in the commercial sector. It was roundly critical of the practice of appointing people to boards , mainly white , male , and stale People who were recruited generally through informal methods like the Golf Club. practically no open advertising . And the make up of UK Boards largely excluded women or BME candidates . ACEVO made representations to the Higgs review and we said that there needed to be a wider pool of candidates. We said that many Third Sector CEOs would make excellent Non Executives . many ran large businesses . Higgs agreed with me and he recommended a further review. That led to the establishment of the Tyson Task Force . Tyson was the dynamic head of the London Business School i sat on the Task Force . It reported .It said Boards had to be more diverse . It recommended a panel of third sector CEOs and others to draw on . And what happened . Well , you can guess. Perhaps if we had a stroppy charity CEO on a Bank Board we might have had someone to challenge the goings on ? Someone who might have suggested the bonus culture was corrupt. That you cannot possibly need to earn the millions these people paid themselves. But in any case we badly need a better mix of people on Bioards .

iow is the time for radical reform of the commercial sector and that begins with Governance . Boards must be opened up to a wider pool of talent . These posts must be openly advertised. People should be chosen on the basis of their ability to bring critical analysis and not to feel they are part of a club of like minded and like thinking individuals . If I were Government I would now be thinking of such reforms to corporate govvernance . The finacial and banking crisis began in our Board rooms . These boards did not excercise proper scrutiny . They need an overhaul .

Franklin Delano Roosevelt , in his memorable Inauguration Speech, in the middle of recession in 1933 , said ,

" The money changers have fled from their high seats in the Temple of our civilisation . We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit . "

So will Messrs Watson and Ryan be leading that charge ?

What on earth is the newly established UK Financial Investments ( the body set up by Government to manage its stake in banks ) thinking of ? If I was David Cameron , who has rightly been talking of reform and corporate soacial responsibiltiy in the private sector , I would ensure this body is either abolished or put into the hands of people who will ensure radical reform . These 2 appointments are not encouraging, though perhaps they are Round Heads in disguise? If anyone reading this Blog knows what these 2 individuals earn or will be paid in these roles I would be interested.

1 comment:

Janet F said...

Stephen,

Well said - the 'establishment' culture (making sure that no-one rocks the boat) is as alive and well with this government as it ever has been. 11 years of 'New Labour' has shown that they're as bad (when in power) as both 'Old Labour' and the Tories before them...

We need more challenge and scrutiny from the population as a whole (each of us as individual citizens) and from organisations with the right principles - the third sector, properly organised and led, ought to be able to take the lead here (although not exclusively, as many private sector organisations have the potential too) but will egos and too tightly-focused agendas get in the way?