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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A new German law wants to force mothers to reveal their child’s biological father

The so-called “milkmen’s kids law” would seek protection for men who feel they have been duped into raising children they believe are not biologically theirs – at the expense of women’s rights.

The German press call them “Kuckuckskinder”, which translates literally as “cuckoo children” – parasite offspring being raised by an unsuspecting innocent, alien creatures growing fat at the expense of the host species’ own kind. The British press have opted for the more Benny Hill-esque “milkmen’s kids”, prompting images of bored Seventies housewives answering the door in negligées before inviting Robin Asquith lookalikes up to their suburban boudoirs. Nine months later their henpecked husbands are presented with bawling brats and the poor sods remain none the wiser.

Neither image is particularly flattering to the children involved, but then who cares about them? This is a story about men, women and the redressing of a legal – or is it biological? – injustice. The children are incidental.

This week German Justice Minister Heiko Maas introduced a proposal aimed at to providing greater legal protection for “Scheinväter” – men who are duped into raising children whom they falsely believe to be biologically theirs. This is in response to a 2015 case in which Germany’s highest court ruled that a woman who had told her ex-husband that her child may have been conceived with another man could not be compelled to name the latter. This would, the court decided, be an infringement of the woman’s right to privacy. Nonetheless, the decision was seen to highlight the need for further legislation to clarify and strengthen the position of the Scheinvater.

Maas’ proposal, announced on Monday, examines the problem carefully and sensitively before merrily throwing a woman’s right to privacy out of the window. It would compel a woman to name every man she had sexual intercourse with during the time when her child may have been conceived. She would only have the right to remain silent in cases should there be serious reasons for her not to name the biological father (it would be for the court to decide whether a woman’s reasons were serious enough). It is not yet clear what form of punishment a woman would face were she not to name names (I’m thinking a scarlet letter would be in keeping with the classy, retro “man who was present at the moment of conception” wording). In cases where it did transpire that another man was a child’s biological father, he would be obliged to pay compensation to the man “duped” into supporting the child for up to two years.

It is not clear what happens thereafter. Perhaps the two men shake hands, pat each other on the back, maybe even share a beer or two. It is, after all, a kind of gentlemen’s agreement, a transaction which takes place over the heads of both mother and child once the latter’s paternity has been established. The “true” father compensates the “false” one for having maintained his property in his absence. In some cases there may be bitterness and resentment but perhaps in others one will witness a kind of honourable partnership. You can’t trust women, but DNA tests, money and your fellow man won’t let you down.

Even if it achieves nothing else, this proposal brings us right back to the heart of what patriarchy is all about: paternity and ownership. In April this year a German court ruled that men cannot be forced to take paternity tests by children who suspect them of being their fathers. It has to be their decision. Women, meanwhile, can only access abortion on demand in the first trimester of pregnancy, and even then counselling is mandatory (thereafter the approval of two doctors is required, similar to in the UK). One class of people can be forced to gestate and give birth; another can’t even be forced to take a DNA test. One class of people can be compelled to name any man whose sperm may have ventured beyond their cervix; another is allowed to have a body whose business is entirely its own. And yes, one can argue that forcing men to pay money for the raising of children evens up the score. Men have always argued that, but they’re wrong.

Individual men (sometimes) pay for the raising of individual children because the system we call patriarchy has chosen to make fatherhood about individual ownership. Women have little choice but to go along with this as long as men exploit our labour, restrict our access to material resources and threaten us with violence. We live in a world in which it is almost universally assumed that women “owe” individual men the reassurance that it was their precious sperm that impregnated us, lest we put ourselves and our offspring at risk of poverty and isolation. Rarely do any of us dare to protest. We pretend it is a fair deal, even that reproductive differences barely affect our lives at all. But the sex binary – the fact that sperm is not egg and egg is not sperm – affects all of us.

The original 2015 ruling got it right. The male demand for reassurance regarding paternity is an infringement of a woman’s right to privacy. Moreover, it is important to see this in the context of all the other ways in which men have sought to limit women’s sexual activity, freedom of movement and financial independence in order to ensure that children are truly “theirs”.  Anxiety over paternity is fundamentally linked to anxiety over female sexuality and women’s access to public space. Yet unless all women are kept under lock and key at all times, men will never, ever have the reassurance they crave. Even then, the abstract knowledge that you are the only person to have had the opportunity to impregnate a particular woman cannot rival the physical knowledge of gestation.

We have had millennia of pandering to men’s existential anxieties and treating all matters related to human reproduction, from sex to childbirth, as exceptional cases meaning women cannot have full human rights. Isn’t it about time we tried something new? How about understanding fatherhood not as winning gold in an Olympic sperm race, but as a contract endlessly renewed?

What each of us receives when a child is born is not a biological entity to do with as we choose. It is a relationship, with all of its complexities and risks. It is something worth contributing to and fighting for. Truly, if a man cannot understand that, then any money wasted on a Kuckuckskind – a living, breathing child he could get to know – has got to be the least of his worries. 

Glosswitch is a feminist mother of three who works in publishing.