Magazine article Management Today

Tick the Box or Make the Judgment

Magazine article Management Today

Tick the Box or Make the Judgment

Article excerpt

The use of checklists has been on the rise for years, especially in the field of corporate governance. Regulators love to see page after page of ticked boxes, believing this proves the regulatee is 'fully compliant' with the current legislation.

For a pilot or a surgeon, a checklist is pretty useful. But in more subjective matters, like the question of whether a company is well run, it gives at best half the picture. Here's a good example of why. A friend of mine is the secretary of a listed company and once a year he has to prepare a compliance statement for the accounts explaining how the company complied, or didn't, with all the various corporate governance codes. This is then approved by the auditor, with, no doubt, careful reference to those codes.

A year or two ago, the audit partner (at a Big Four firm) rejected my friend's original draft. So he did a little research and produced a more polished version. 'Perfect,' said the audit partner. 'That's funny,' replied my friend, 'because I based the language on that used in the annual report of Northern Rock, the year before its financial difficulties.'

Hmm. However convincing something sounds, there's no substitute for judgment. …

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