The fashion among economists is nostalgia for the Seventies, a period that, like our own, was scarred by inflation, energy crises and conflict in the Middle East.
But the recent messes in some of the FTSE 100’s most important boardrooms, including Barclays and BP, have sent me on a different trip down memory lane: Back to the early Nineties.
As older readers will recall, the foundations of our current corporate governance regime were laid in a 1992 report by Sir Adrian Cadbury, a scion of the Quaker chocolate dynasty.
Thinking has evolved, in that boardroom behaviour these days is seen through the lens of ESG, or environmental, social and governance concerns.
Ironically, though, as we hit peak corporate sanctimony over green issues, gender and various woke social causes, the all-important G for governance is forgotten.
Missing: UK governance’s effectiveness depends on a strong chairman and independent directors able to serve up a hefty helping of scepticism
Indeed, G might stand for gullibility, judging by the way some illustrious boards seem to have been taken in by errant CEOs. Most jaw-dropping is Barclays, whose former chief executive, Jes Staley, was last week fined and banned from the industry over his links to paedophile Jeffrey Epstein. Staley has appealed.
Chairman Nigel Higgins is paid £800,000 a year to run the board and hold the CEO to account. He and his colleagues appear to have accepted at face value assurances from Staley, when any ordinary current account holder with an ounce of common sense could have seen more rigour was needed. Higgins was at the helm in 2019 when the bank wrote to regulators with soothing words over the relationship between Staley and Epstein.
He was also well aware that a year earlier, Staley had been fined more than £640,000 for trying to expose a whistleblower.
That in itself might have prompted the toppling of some CEOs, yet the Barclays board backed Staley.
It continued to stand by its man in late 2021 when he stepped down over the Financial Conduct Authority’s Epstein investigation. The board went so far as to declare itself ‘disappointed’ at his departure.
The governance failure at Barclays is not an isolated incident. The BP board looks to have fallen short in its approach to former boss Bernard Looney and his personal relationships with colleagues.
Tittle-tattle about Looney’s swordsmanship, as Private Eye might put it, was rife in the City for years. Yet the board accepted his assurances about past liaisons and his future conduct when he became CEO.
Red faces, then, when Looney was forced to leave after admitting he had not disclosed the full extent of his dalliances.
The Nigel Farage debacle at NatWest also threw up governance questions. In the run-up to the ousting of former CEO Alison Rose for divulging details of Farage’s account, the instinct of the chairman was to back her, even when the futility of that stance ought to have been obvious.
These episodes are distinct, but have in common a particularly British approach to running boardrooms based on membership of an elite club in which everyone is assumed to be the right sort of chap or chap-ess.
Attempts to counter this by recruiting directors from more diverse backgrounds don’t entirely work, because individuals can be flattered, bamboozled or outnumbered into swaying with the prevailing wind. The Cadbury Code and its successors did not so much reform as enshrine this culture.
UK governance relies on guidelines, not rules, and on constructive dialogue between companies and shareholders, rather than the heavy hand of the law. The great advantage is it allows firms to be flexible.
But its effectiveness depends on a strong chairman and independent directors able to serve up a hefty helping of scepticism.
Instead, we’ve seen a parade of credulity, wilful blindness and misplaced loyalties.
