Simon Laffin is Chairman of Flybe and Assura Group, and a Non-Executive Director at Quintain. Simon was formerly CFO at Safeway and has served as a Non-Executive Director at Aegis, Mitchells & Butlers and at Northern Rock, as part of the rescue team.
We need evidence-based regulation in business and not the current knee-jerk reactions to media and political pressure. How about regulation based on thoughtful analysis of what went right and what went wrong, instead of ‘good ideas’ dreamt up in regulators' offices?
It's worth looking at aviation safety, which has been a major success story. The UK Air Accidents Investigation Branch (AAIB) is now nearly a hundred years old. Its remit is to "improve aviation safety by determining the causes of air accidents and serious incidents and making safety recommendations intended to prevent recurrence...It is not to apportion blame or liability."
The AAIB doesn’t prosecute or seek media headlines. Its reports are technical, even dull. And they understand that pilots and air traffic controllers are imperfect humans just like the rest of us.
The AAIB also appreciates that a serious incident is almost never a single-cause event. Their reports try to lay out the sequence of failures – frequently a dozen or more – that lead to an incident, and then come up with safety recommendations for each one. So you can trace every proposed rule or process change to a specific failure and an analysis of how this would reduce the chance of a recurrence. Who can show similar provenance and integrity in our current corporate governance rules?
Yes. These days boards are much more governance-orientated and conscious of how shareholders will react to their decisions, especially when it comes to remuneration. But the pendulum may have swung too far, with boards spending too much time second guessing how certain stakeholders will react.
Their role should go beyond the administrative to be a confidential sounding board for the non-executives.
The Company Secretary should be the first port-of-call for all governance matters, with all the regulatory and compliance know-how at their fingertips. They should be treated as a business partner.
To tell the story of what has happened and why, and what we expect to happen next!
Board reports should be clear, concise and they should offer an unvarnished account of what’s really going on. The board shouldn’t be wading through spreadsheet printouts trying to spot the crocodile. It should be a matter of professional honour for management, and especially the CFO, to tell it as it is.
Alan Johnson’s memoir, Please, Mister Postman. It’s the second volume of his autobiography, telling how he rose from desperate poverty to become Home Secretary.
There are too many politicians around today who haven’t made a fraction of that journey.
Always do what is right. Then worry about how to explain it to the shareholders.
If it’s really the right thing to do, there will be a way to convince people.