“The governance of individual companies depends crucially on the culture that is in place”
That remark by FRC Chairman Sir Win Bischoff signalled the determination of the Financial Reporting Council to promote good corporate practices backed up by strong organisational cultures in 2015. Sir Win’s comments coincided with the release of the FRC’s annual review of Corporate Governance and Stewardship.
Overall the report is positive with 93.5% of FTSE 350 companies complying with all but 1 or 2 provisions of the Corporate Governance code and 61.2% complying fully. Audit committee reports have also continued to improve as have reports on diversity. However, the FRC say there is still more to do in respect of diversity with “Improving the executive pipeline in connection with the wider diversity issue” remaining a priority. To this end the FRC is currently undertaking a project which aims to identify and spread best practice in respect of high quality succession planning including the importance of building greater diversity into executive boards.
Research carried out by Cranfield has highlighted the practice among many boards to consider succession planning as merely the replacement of one board director by another. That report commented that “This is really a retrospective response and does not address the more strategic issue of longer term succession planning, including the development of executive strength within the organisation.”
Businesses which expect their leaders to suddenly pop up fully trained are either naive or are relying on ‘buying in’ talent when they need it. Leadership training should start long before an individual steps into the C-suite and even then leaders should go on honing their talents to enable them to maximise the potential of the organisation. Skills such as communicating, negotiating, empowerment, planning and listening are ones which can be developed as individuals move throughout the organisation.
From the most junior trainee working out how to optimise the coffee run to team leaders undertaking responsibility for projects, the more that the leadership actively looks for opportunities to train employees in leadership skills the better the chance will be that strong and talented individuals will be ready to step up to the executive challenge. Corporate governance is not simply about clarity in reporting or maximising investor returns. True governance looks at creating a culture which maximises opportunities for all and that includes developing and training the next generation of leaders.
If you would like to find out more about corporate governance feel free to browse our website www.elementalcosec.com or contact Nick on nick.lindsay@elementalcosec.com.
