Platform: Keeping on the right side of corporate laws - Communications experts should be ahead of the game in the rapidly accelerating corporate goverance debate, says Charles Watson

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 communications challenges.

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

communications challenges.



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

managers.



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

fray.



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

real.



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.



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