Sunday, 15 September 2013

In defence of conflict and argument in corporate governance

The more you dig into public policy work undertaken in corporate governance, the more obvious it is what a narrow range of opinion is expressed. In reality, a relatively small number of organisations and individuals dominate, much networking goes on between them, and significant differences of opinion are hard to detect. I am not making a conspiratorial point here, but rather highlighting a simple fact that on important issues about the governance of companies a relatively small number of voices count, quite a few of them talk to each other, and they tend to say the same thing.

To people within the system this no doubt looks unproblematic. Why wouldn't organisation A talk to organisation B about policy isssues, especially if they are usually on the same page about things? From here it really isn't a big leap to base your consultation response on one written by another organisation, or to copy and paste chunks from your sector's representative body and stick your company's letterhead on the top. Given that there are 'common sense' and 'obviously right' positions on most issues, is there really anything controversial about this?

I do think there is a deeper problem here. The repeated emphasis on 'consensus', and avoiding 'unintended consequences' resulting from even the mildest reform, leads to an incredibly small c conservative approach involving little real debate. As I've blogged before, the public expression of dissent - even in an area as important at the way companies are run - is actively discouraged. Where dissent is expressed, through the exercise of voting rights, this is often characterised as a failure, rather than an entirely legitimate disagreement, or even a potentially creative moment. 

My personal view, which I don't expect to be at all popular in corporate governance land, is that UK corporate governance has become very insular and uncreative. The constant characterising of consensus as desirable and conflict as problematic in practice leads to an instinctive defence of the status quo whatever the issues. For example, a move away from unitary boards (or even to employee representation on unitary boards) would be considered 'extreme' by the terms of the soggy UK consensus we have currently. This is despite the fact that other successful nations have such systems. Similarly, 'one share one vote' and equal treatment of shareholders are unchallengeable beliefs, despite the possibility that in some circumstance there might be better alternatives. Or just look at the wave of conservative opinion unleashed in response to relatively mild proposals put forward by the Competition Commission - and look at how many different groups it encompasses. Investor groups on the same side as the corporate lobby, the Big Four and the FRC. It only makes sense if there really is a 'correct' stance to take, rather than some rather contestable claims about the dangers of change.

I would prefer to see more argument and more conflict. In another field I think that it would taken as read that the existence and discussion of a diverse range of views was a desirable thing. In contrast in UK corporate governance, no chance is missed to admininster the anesthetic of consensus. The results are complacency (certainly about the superiority of our model) and the bizarre sight of investors repeatedly arguing against an extension of their own rights.

I'll end with a quote from Colin Crouch's latest book which is relevant.
"We often manage to achieve positive-sum outcomes between markets and compensating measures for them, but not usually through coherent planning. Rather they come through conflict and confrontation... The interests served by intensifying markets and those served by protections from it are usually different, and they are usuallydistinguished by different degrees of income and wealth. It is probably as well that things remain that way, for conflict and contestation increase our chances of finding new solutions to problems - and of evading rule by benign dictators who claim to be working for us all."

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