A Failure of Governance...
An IoD Policy paper offers its insights for directors and policymakers from phase 6 of the Inquiry
The Institute of Directors has published a report on the Post Office Scndal, A Failure of Governance. I was part of a fascinating advisory group, skilfully led by IoD’s Roger Barker.
The report makes a number of recommendations:
Professionalise the boards of state-owned entities
Commit Directors to clear ethical standards
Reform the law on computer generated evidence
Reposition UKGI
Introduce a new corporate form for companies operating in the public interest
Strengthen whistleblowing protections
Promote the tech literacy of board members and appoint a Chief Technology Officer to the boards of government-owned entities
Encourage responsible management of legal risk
The report also offers a great, high-level analysis of some of the enquiry evidence from a corporate governance perspective.
I was particularly pleased that the IOD took on the issue of legal risk. Here's what the paper says:
The Post Office scandal highlighted the need for responsible oversight of legal risk at board level. The UK Corporate Governance Code should be amended to define an explicit legal risk responsibility for a designated board committee (e.g. the risk or audit committee, or where appropriate, a specific legal risk committee). The committee should update the board on a regular basis on matters such as litigation, disclosure exercises, investigations and regulatory responses. In financial services, this role should be mandated to a designated individual under the Senior Managers and Certification Regime. The Financial Reporting Council should develop supporting Guidance which advises directors on how to manage the advice of internal and external legal counsel, including the ability of senior legal advisers to access the Board when dealing with matters of serious concern.
It was also heartening to see the level of detailed knowledge and engagement with what has happened in the Post Office within the group.
Having watched nearly all inquiry witnesses over the last couple of years I have a broad sense of the failings within the PO. I have also read the Justice Fraser judgement. From being annoyed, aghast, amused and sometimes frankly ashamed of the “goings on” it is most welcome to see the headline proposals from the IoD.
The idea of keeping a close eye on "legal risk" can be welcomed, but in the PO's case, such supervision as there was, and as there would be in the future, depends on what has turned out to be aberrant (but possibly lawful) behaviour by the lawyers who the "legal risk" people would be supervising. They were being assured that some of the biggest names in the business were saying that all was well, the judge had gone off the rails and could be removed, problems could be hidden away under the guise of privilege etc, etc. How is a legal risk committee of the board going to deal with that?
What needs to change is the way lawyers understand the difference between right and wrong and how they deal with adversarial litigation in consequence, and that begins and ends with a positive duty to maintain the interests of justice, dismissed so readily by the luminaries whose evidence we heard. Without that, all of the board risk committees in the world won't help.