Corporate governance

Independent directors, quotas for women, chairmen to watch over chief executives… it is striking how much of the time spent talking about companies is spent talking about how they should be governed.

Whenever there is a corporate crisis – whether it is the fraud involving drinks company Guinness in the 1980s, or the collapse of investment bank Lehman Brothers in 2008 – the cry goes up for better oversight by corporate boards.

Corporate governance has been one of the most influential corporate movements of the past 30 years. The overwhelming drive has been to staff corporate boards with independent thinkers who can rein in hubristic chief executives and prevent company directors from succumbing to “groupthink”, the tendency to echo each other’s views while the company pursues a disastrous course. Properly governed boards have also been given the task of keeping chief executive pay under control.

One of the early attempts at corporate governance reform, the UK’s 1992 Cadbury Report, was followed by many others around the world. There is, however, no unanimity over what constitutes good corporate governance. In the UK, the separation of the chairman and chief executive’s role is seen as an unalloyed good. In the US, powerful chief executives, such as Jamie Dimon, chief executive of JPMorgan Chase, have seen off demands that they split their role with a chairman.

The latest battle on the corporate governance front is for the appointment of women to boards. That women are scandalously under-represented on boards in most countries is undeniable.

But advocates of increased female representation go further. They say women would bring a different way of looking at the world and would prevent companies from making the same old mistakes.

Yet years of reform have failed to prevent repeated examples of company excess, fraud or financial collapse. Looking for more female directors would give companies access to more talent. It is unreasonable to expect women board members to succeed where so many men have failed.

Michael Skapinker