Stuart Kirk (Opinion, January 27) spent the whole of his article on corporate governance attacking a straw man of his own making.
I suspect it might have been a better use of his time to understand the basics of corporate governance this side of the Atlantic. The British tradition of corporate governance — begun by the Cadbury report of 1992 and since emulated all over the world — is deliberately permissive, not restrictive. Our corporate governance errs on the side of liberty rather than prescription. Each of the American characteristics Kirk seems to admire is lawful in the UK under our permissive “comply or explain” regime. A company can adopt whatever form of corporate governance it wishes, so long as it is able to justify its choice to shareholders in its annual report. Good governance may not be essential to business success, but when companies fail, poor governance is often shown to have been a key factor.
Kirk’s ire seems aimed principally at governance rating agencies, which often “gold-plate” governance, equating guidance with hard rules. This is a concern we share. We do need to make sure that guidance remains guidance, and is not fossilised by monitoring agencies into hard law.
At root, corporate governance is merely a codification of past wisdom. Since much of this wisdom has been learnt at great expense, as the byproduct of corporate failure, isn’t it worth paying attention to?
Sara Drake
Chief Executive, Chartered Governance Institute UK & Ireland
London EC1, UK
