Blog Article

Cup Hands...

Robert Moulin | | Return|
Thursday 5 November 2015

Waiting to board a recent flight I, like most other travellers, was locked into my phone. No candy crush or angry birds for me, rather a search for a 1970's television ad with it's catchy jingle "cup hands, here comes Cadbury's". For those with an interest in social history the advert is a fine example in the art of persuading us to part with our cash; one that has changed out of all recognition in the intervening years. It's well worth a viewing.

Cup hands, here comes Cadbury's!
For readers unfamiliar with the name, Cadbury's is one of the UK's largest makers of what we - at least here in the UK - call chocolate.

Its former Chairman, Sir Adrian Cadbury, passed away in September.

Whilst the company is synonymous with, amongst others, its Dairy Milk and Drinking Chocolate brands, (the subject of the aforementioned advert), Sir Adrian should be remembered by managers, shareholders and others for his positive impact on the business community, both inside and outside of the boardroom.

It was his Cadbury Report, written in the early 90's, that was so pivotal in the development of what we generally describe today as Corporate Governance. Amongst others, its recommendations included the division of power between chairmen and chief executives; the appointment of non-executive directors with stronger powers; and fuller disclosure of directors' pay.

The world has moved on and has changed considerably in those twenty odd years since, yet the principles and values of The Cadbury Code remain consistent to this day. Sadly, despite the best efforts of Cadbury and others, also unchanged is the continuing re-occurrence of bad business and corporate wrongdoing the world over. Empirical evidence would suggest Sir Adrian was correct when he said "codes do not catch crooks".

Indeed, a recent Harvard Business Review piece advocates, "it's time to develop 'Corporate Governance 2'". The article goes on to suggest - "achieving best practice has been hindered by a patchwork system of regulation, a mix of public and private policy makers, and the lack of an accepted metric for determining what constitutes good governance". Fair point.

So, what exactly is'Corporate Governance'?

Well, search for it and Google will return around 45 million responses. The front page alone gives seven definitions - without a definitive one. Maybe the HBR is correct - this needs sorting, and quick.

Whatever the description, what is evident is that good corporate governance must nowadays go above and beyond the 'simple' issue of protecting against fraudulent behaviour and corruption, although for all companies, and countries - especially developing ones - this must surely continue to be the starting point.

A search for Polly Peck, Robert Maxwell, Bank of Credit and Commerce International and - more recently - Enron are testament to that.

The shaping of good governance then lies in constructing the board so the individual personalities mix and react in-line with strategy; that good and sustainable responsibility is shown to the community, and to the environment; that all stakeholders are adequately protected and rewarded; without of course forgetting that the company is honest and transparent in its dealings.

Oh dear Toshiba, Tesco's, VW, and others, many others - what happened?

We, as sound corporate reporters, with our quality standards, are an important part of the corp gov objective, but just one part and it's an objective that must always evolve. Education has to be a key player in that evolution. On that score, the main international accountancy bodies now exam specifically on corporate governance and typically an ethics framework runs across the various levels leading to professional qualification. This can only be for the good, as is the fact that issues of governance are being reported with greater prominence.

Take the cyber attack on the UK tele comms company Talk Talk (potentially putting the sensitive information of millions of customers at risk) that hit the headlines only this week. The Financial Times was soon focusing on the security breach as a corporate governance issue; it's no longer just a matter of who was attacking the company and why but how could a listed company allow itself to be so vulnerable to attack and not protect its most important asset? This really is a changing world. We must learn, we must adapt.

Here, the clocks have just gone back one hour. The nights are cold and drawing in - time I think for a mug of my favourite warming chocolate drink. Year after year the taste is the same - perfect - no need to change. As for how to perfect sound, principled, relevant corporate governance - we must keep searching.

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