For many it’s a disappointment. Some have no doubt heaved a sigh of relief that nothing very substantive is going to change.
This week the government published its response to the consultation on corporate governance. We submitted our own report in response to the original Green Paper. To be honest, following the election results, I had somewhat expected this whole exercise to be kicked into the long grass. It is to the government’s credit that it has not been and that something has emerged from the exercise (see the Radix evidence here).
Given the reality of a severely weakened government, we might expect that any proposals for reform would be timid. And so they are. The proposals put forward are small incremental steps.
They are a far cry from the boldness of the Conservative manifesto that promised to change corporate culture in the UK. In many parts, the government’s response results in yet more calls for talk and consultation rather than any real action.
Having said that, while the speed of travel is glacial, the direction of travel seems generally reasonable.
Tackling executive pay was never going to be an easy task. The new requirement to publish pay ratios will doubtless create many column inches. It remains to be seen whether it will serve to ratchet executive pay downwards or upwards.
Also to be welcomed is the government’s recognition of the inadequacy of implementation of the spirit behind Section 172 of the Companies’ Act. While declining to change the wording of the Act, new reporting requirements will enable companies to explain how they are taking all stakeholders into account in decision making.
Even so, many who were excited at the prospect of real change in corporate Britain will be deeply disappointed by the government response. Some of those who hoped that nothing, or nothing much, will happen will be anxious about some of the changes proposed.
Overall, given the current political realities and the impending Brexit dislocation, it would have been foolish to expect any kind of radical reform. Yet, even in areas where no action has been taken at this time, the consultation seems to have served to bring to the fore some of the real issues affecting governance and incentive structures in the UK.
Baby steps have been taken and, as yet more talk has been called for, there remains the opportunity for all parties to continue constructive dialogue on ways forward.
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