In recent weeks much debate has taken place within the corporate
communications profession about the implications of the Stock Exchange’s
newly published Combined Code of Corporate Governance. Its new
requirements will no doubt present quoted companies with additional
However it is important that corporate communications professionals must
not now feel that their role in corporate governance affairs is limited
solely to that of skilled draftsmen of carefully crafted apologies. If
they think that responding to the Combined Code’s new obligations is the
end of the matter they are blind to an accelerating debate which could
soon leave this latest code of best practice gathering dust in the
archives along side its Greenbury and Cadbury predecessors.
Many companies are now facing escalating criticism on corporate
governance issues from a wide range of constituencies, including the
growing number of powerful ’interventionist’ institutional fund
Many of these organisations fear that the Combined Code’s flexible
nature leaves it open to abuse. In response, a number of alternative
governance codes have been published, which in some cases radically
exceed the requirements of the new official version. And now the tempo
of this debate is accelerating further as the Government joins the
Earlier this year, Margaret Beckett announced a sweeping review of UK
company law, warning menacingly that unless companies sharpened up their
corporate governance acts, prescriptive legislation would be introduced
to enforce best practice.
The stakes have subsequently been raised further by Gordon Brown’s
threats of Government intervention to curb excessive boardroom pay. As
New Labour starts to consider how best to secure its second term,
radical corporate governance reforms could arguably prove more popular
than their last manifesto’s windfall taxes on privatised utilities. The
prospect that the Combined Code could soon be cast aside is very
We are well aware of the manner in which corporate governance is capable
of overshadowing a company’s performance. The nightmare scenario of the
prospect of government censure adding to the criticism which companies
have to face in such situations is now a stark reality.
Against the backdrop of this dynamic debate a number of progressive UK
companies have awoken to the fact that corporate reputations can just as
easily be enhanced by corporate governance as they can be damaged.
For example, in February this year Foreign and Colonial, one of the UK’s
leading fund managers, announced sweeping changes to the corporate
governance practice of its managed investment trusts which far exceeded
existing guidelines of even the most zealous interventionist fund
manager. As a direct result, extensive positive press coverage was
secured right across the very media read by its customer base.
Corporate governance will continue to rise progressively up the list of
single issues capable at a stroke of impacting on corporate reputations
and distracting companies’ stakeholders from the messages which
management would otherwise wish them to focus upon. It is therefore
absolutely critical that those of us who are entrusted to protect and
nurture those reputations are contributing to the very planning process
which determines governance policies.
The progressive corporation will appreciate the enormous benefits which
can be reaped by not just reactively implementing governance best
practice - but, more importantly, in proactively anticipating it.
Charles Watson is a director of Financial Dynamics.