What are the fundamental principles of corporate governance?

Board diversity and appointments make good headlines - but the basic principles required for successful board-led leadership are even simpler. It's time we stated them again.

In my last New Statesman blog in July 2013 I talked about the responsibilities of companies operating today; what these might be and why we think they are important, as we continue to examine what went wrong and led us to the global financial crisis.

In the light of this, our focus on the role of corporate boards heightened. They are the people who set a company’s strategic aims and provide the leadership needed to put them into effect. This is nothing new: company boards have always had this task. The UK Corporate Governance Code, which guides many businesses, states that the board sets the values of the company, and this is very different from running the business day-to-day.

For example, there is much discussion of who should be on the board. The diversity debate comes to mind immediately, but that is only one aspect. It makes a good news item when a novel appointment has been made from outside the usual candidates.

But this is not just about diversity. At the same time, there is a lot of support for getting people with extensive experience and competence on board. This could be particularly meaningful in highly specialised industries. But it might risk board members getting too close to the operational management of the company.

What board members need to remind themselves is that they are collectively responsible for the long-term success of their company. This may sound obvious but it is not always recognised.

Why do I feel the need to say this? Perhaps because the idea might feel slightly awkward in light of current concerns about the harm that dominant individuals on boards or a "group-think" mentality can do to decision making. Indeed, the challenge is for a board member to be independent, bringing in a different viewpoint and wider experience, but at the same time working together to achieve the same objective.

In a way, this is asking board members to deliver multiples of responsibilities. But then again, how different is it from us accepting the need to balance different – sometimes conflicting – responsibilities in our daily life? A good mix of people who can constructively challenge each other in the board room can help businesses to make meaningful decisions in rapidly changing markets.

Our suggestion is to get back to the fundamental principles of good governance which board members should bear in mind in carrying out their responsibilities. If there are just a few, simple and short principles, board members can easily refer to them when making decisions without losing focus. Such a process should be open and dynamic.

In ICAEW’s recent paper What are the overarching principles of corporate governance? we proposed five such principles of corporate governance.

·       Leadership

An effective board should head each company. The Board should steer the company to meet its business purpose in both the short and long term.

·       Capability

The Board should have an appropriate mix of skills, experience and independence to enable its members to discharge their duties and responsibilities effectively.

·       Accountability

The Board should communicate to the company’s shareholders and other stakeholders, at regular intervals, a fair, balanced and understandable assessment of how the company is achieving its business purpose and meeting its other responsibilities.

·       Sustainability

The Board should guide the business to create value and allocate it fairly and sustainably to reinvestment and distributions to stakeholders, including shareholders, directors, employees and customers.

·       Integrity

The Board should lead the company to conduct its business in a fair and transparent manner that can withstand scrutiny by stakeholders.

We kept them short, with purpose, but we also kept them aspirational. None of them should be a surprise – they might be just like you have on your board. Well, why not share and exchange our ideas - the more we debate, the better we remember the principles which guide our own behaviour.

Back to basics: What are the fundamental principles of corporate governance? Photograph: Getty Images.

Jo Iwasaki is Head of Corporate Governance at ICAEW.

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PMQs review: Jeremy Corbyn hammers David Cameron on green energy – but skips Syria

In a low-key exchange ahead of the Autumn Statement, the Labour leader covered two areas where the government is vulnerable: renewable energy and women's refuges. However, he failed to mention Syria and the Russian plane shot down by Turkey.

When PMQs precedes an Autumn Statement or Budget it is usually a low-key affair, and this one was no different. But perhaps for different reasons than the usual – the opposition pulling its punches to give room for hammering the government on the economy, and the Prime Minister saving big announcements and boasts for his Chancellor.

No, Jeremy Corbyn's decision to hold off on the main issue of the day – air strikes in Syria and the Russian military jet shot down by Turkey – was tactical. He chose to question the government on two areas where it is vulnerable: green energy and women's refuges closing due to cuts. Both topics on which the Tories should be ashamed of their record.

This also allowed him to avoid the subject that is tearing the Middle East – and the Labour party – apart: how to tackle Isis in Syria. Corbyn is seen as soft on defence and has been criticised for being too sympathetic to Russia, so silence on both the subject of air strikes and the Russian plane was his best option.

The only problem with this approach is that the government's most pressing current concern was left to the SNP leader Angus Robertson, who asked the Prime Minister about the dangers of action from the air alone in Syria. A situation that frames Labour as on the fringe of debates about foreign and defence policy. Luckily for Corbyn, this won't really matter as no one pays attention to PMQs pre-Autumn Statement.

Anoosh Chakelian is deputy web editor at the New Statesman.