IoD releases study of good governance
The best companies for corporate governance in the FTSE 100 are British American Tobacco (BAT) and Unilever, while Tesco and Berkeley Group Holdings are the worst, according to a report released by the Institute of Directors (IoD).
The purpose of the report is to encourage ‘the study of good governance’ and ‘stimulate public debate on the importance of corporate governance in rebuilding the reputation of the UK business community,’ says the IoD.
The study considers companies according to a list of objective, measurable factors from public sources, including: board effectiveness, pay, audit and risk, and relations with shareholders and other stakeholders. It also surveys stakeholders’ perception of a company’s corporate governance.
‘The results indicate that different components of corporate governance have different impacts on practitioners’ perceptions of it,’ the report notes. ‘The study also confirms that there is no agreement across stakeholders about the definition of good governance.’
BAT is the highest-ranked company by a long shot, with a model score of 793. Behind it come Unilever and Diageo with 778 and 775, respectively. But none of these companies make it into the top five according to their perception score. The best company, according to stakeholders, is Smiths Group; BAT ranks just 42nd.
A closer analysis of the model scores shows customers, investors and analysts all care more about shareholder relations than audit, risk and external accountability.
The lowest-ranking companies, Tesco and Berkeley Group, score 603 and 641, respectively. In the public perception survey, Tesco is second-to-last with a score of 526, while Berkeley comes 91st with a score of 613.
The report is the IoD’s second on corporate governance. IoD deputy chair Ken Olisa says the group launched the Good Governance Report due to concerns that ‘corporate governance best practice in Britain has developed as a knee-jerk reaction to financial or corporate scandals.’
Since then UK Prime Minister Theresa May has vowed to tackle big business and promised to revamp corporate governance rules. She has said she wants more transparency over bonus targets and has demanded that companies make public the ratio of executive pay to the average worker.
