Newspaper article The Evening Standard (London, England)

An Example to Follow from C&W; City Comment

Newspaper article The Evening Standard (London, England)

An Example to Follow from C&W; City Comment

Article excerpt

Byline: ANTHONY HILTON

ONE of the problems with corporate governance, indeed with anything driven by government and Whitehall, is that it is all about inputs not outputs.

Because they have little direct management experience, civil servants and politicians believe that you get what you want by defining the objective, then setting targets you believe will deliver it. This falls down because the objective is often incoherent and the targets become an end in themselves.

And, of course, management is difficult, political and messy. Things go wrong, circumstances change and people say one thing and do another.

The just-published annual report of Cable & Wireless breaks new ground by tackling these issues head on. In the pages devoted to reporting on corporate governance, the independent directors headed by former Orange boss Graham Howe give their verdict on the things that chairman Richard Lapthorne thinks really matter - the outputs referred to above - in the form of a " Statement from Independent Directors".

The statement addresses the perceived quality of the relationship between the chairman and chief executive, the degree of openness between the chief executive and the board, the visibility of checks and balances within the executive team, and whether the questions that are asked by non-executive directors in the boardroom have been adequately addressed.

There is some interesting history to these questions. Back in the 1980s when he worked for Courtaulds, Lapthorne said the pension fund there delivered consistent outperformance by avoiding companies like Coloroll, British & Commonwealth and Polly Peck, each of which in different ways went on to cost investors a great deal of money.

The pension fund would not invest in companies where it could not see checks and balances within the executive team and a good working relationship between chairman and chief executive. The lesson Lapthorne took from this was that in these days before corporate governance, investors could, it they used their judgment, spot weakness in the behaviour of boards and senior managers which might lead to real problems later on. …

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