ACCA’s Accounting for the future conference kicked off this morning with a panel debate on how boards and companies need to consider the needs of their stakeholders. Chairing the session was Professor Andrew Chambers and he was joined by Paul Moxey, ACCA, Tony Hewitt, Imperial College Business School and Catherine Howarth, Fair Pensions. This was an interesting debate watched by over 650 individuals. Key themes included defining and prioritising various stakeholders, identifying where the responsibility lies within organisations when it comes to engaging with stakeholders and how regulation such as corporate governance can have an impact. Detailed below are some of the questions that came in from attendees and the responses from ACCA expert Paul Moxey:
I agree with the enlightened approach. Does the panel think that an approach would be to have a representative stakeholder from various groups to be present on the board in a non-exec director style capacity?
Having stakeholder representatives on boards is an interesting idea but it does not sit comfortably with the legal situation regarding directors in a number of jurisdictions including the UK. In the UK we have unitary boards and, legally, all directors should act in the interests of the company and all directors have an equal responsibility to do so. So, in law, having a director represent the interests of any particular stakeholder could be problematic. In practice, though, it is not uncommon for a director to have a particular affiliation, e.g. they are a member of a family with a large block of shares, they have been appointed by an investor. In theory such directors must put any personal or specific stakeholder interest as secondary to the company interest. The practice may well be rather different. Nevertheless the idea does seem worth exploring.
I note that neither the bank nor the government is mentioned as stakeholders yet I believe they are important?
Clearly banks potentially are important stakeholders as are societies whom governments represent. From a practical point of view, a government can be an important and influential stakeholder for many large companies e.g. as was the case with the US Government and BP after Deepwater Horizon.
How do you unify a multi diverse group of people with different values who happen to hold shares to effect involvement of shareholders in corporate governance?
The answer of course is that you cannot unify all of them. You can hope to unify some of them which is why the effort has gone into the Stewardship Code in the UK. Bodies such as the Asian Corporate Governance Association and International Corporate Governance Network also play an important role in education and encouraging investors to engage more with companies.
Should it be mandatory for Trade Unions have a representative on the board?
The answer probably depends upon your political point of view. In Germany, many boards have employee representatives who in practice are appointed by unions. I have heard very mixed views about the value of this. The danger of course with trade union representatives is that they pursue a political agenda rather than looking at the best interests of the company and its workforce.
Even footballers are fined if they do something which is shown to be contrary to accepted practice. Would directors become more accountable financially and morally if they were fined rather than the shareholders picking up the bill?
I think it is very likely that the propensity for the US authorities to go after high profile corporate wrong doers will have had a salutary effect on senior executives and board members generally. So I think the answer is yes – they would be more accountable. The danger though would be that good people may not want to become directors, this would be OK if other good people came forward. My concern though is that powerful people in a large organisation might choose not to become a director but still manage to have a lot of practical control over what a company does. It would be unwise for anyone to become a director in such a case but in practice many directors would not know what is going on until it was too late.
What about requiring PLCs to hold an Interim General Meeting within one month of release of half-yearly results? Shareholders can ask the Board “any surprises so far or expected”? A good chance to align the thoughts of boards and shareholders.
A nice idea but large shareholders will have access to boards anyway. They prefer one to one meetings to the General Meeting. This is why AGMs are usually very sterile affairs. The situation might be different if small shareholders could get more involved.
There seems to be not enough inter-face and monitoring of the Board with the day to day management. What steps can be taken to affect this?
This problem has been with us for a very long time and successive changes to company law or governance codes does not seem to help. Something is needed to make directors more accountable. Better engagement with shareholders will help but is not a complete solution. Some regulatory and supervisory change may be needed but unfortunately regulation usually has unintended consequences.
What possible challenges are there in achieving good corporate governance in intergovernmental organisations like OPEC?
We are still learning how to make governance work in listed companies in the private sector. The essential problem is how stakeholders can hold boards to account and how can boards hold management to account. The actors involved, and their personal agendas and incentives, are very different in intergovernmental organisations but the underlying problems are the same.
Bankers used to be regarded as safe, respectable, honest individuals. Now they are viewed as reckless, self-interest and dishonest. Is there a danger that accountants, because they didn’t highlight the high leverage of the banks, could be besmirched?
There is a danger but it has not happened except to a very limited extent. I think that what went wrong with banks and the financial system was so complex that very few people understand what happened and why. The media and governments focussed on easy blame targets such as so called greedy bankers, ignorant or supine non-executive directors and absentee shareholders. The role of accountants and auditors is so complicated that few people understand how they helped or hindered.