Investigations into Carillion have revealed executives received large pay packets in the midst of multiple profit warnings, leading to the business folding with £1 billion debt and over 1,000 redundancies. Two weeks later similar fears were sparked for Capita. Is it time to rethink corporate governance?
Martin Tiplady, MD of Chameleon People Solutions, says:
"The top team at Carillion did not act well. Profit warnings were made, but the one action taken locked their bonuses safely away. That was until the government intervened; but I won’t hold my breath on that one.
"The nerve displayed by the Carillion team is staggering. But I think most senior teams have a conscience that stops them performing such antics.
"As is often the case, ministers show muscle by announcing a review and revisiting ‘same old’. The reality though is that resources are better invested in properly applying what we already have rather than designing another level of governance.
"A casual remark made to me recently by a respected HRD suggested that his department could do little if Carillion occurred in his business. I told him HR has a central role to play in upholding good business disciplines. Whether it has any effect depends on their standing. But never suggest that it is not our business. No wonder HR is often dismissed as expensive and inward-looking."
Helen Pitcher, chair of Advanced Boardroom Excellence, says:
"Corporate governance changes are due for implementation in January 2019. One of the key changes in this ‘revolution’ in corporate governance is a shift of emphasis to the sustainability of the business and to a more balanced oversight by the board; considering all the key stakeholders in their deliberations and showing how they have done so.
"Consequently, while the machinery will be in place to do the right things, it requires increased ‘professionalisation’ of the NED population to carry these responsibilities forward.
"The HR function is not responsible for corporate governance any more than any other function. It does, however, have its hands on many of the information flows that boards will require to fulfil their responsibilities. This will be where HR needs to step up and understand its support role to the board on culture, employee views, remuneration, executive succession and pipeline diversity.
"Additionally, there are also significant opportunities for HRDs to focus on their own potential as NEDs."
Check back tomorrow to read part two of this hot topic