OPINION:IN RESPONSE to a recent Institute of Directors survey on the question "do you think standards of corporate governance are high in Ireland?", 79 per cent of respondents answered No, with 21 per cent giving a positive response. So from a jury of their peers, this comes as a damning indictment of the current perceived status of corporate governance in Ireland.
Recent revelations of corporate malfeasance lead us to believe that corporate governance is undoubtedly fractured and damaged. These high-profile cases have seriously undermined public and investor confidence
in the governance of many institutions. We do have legislation and regulation. But what we now see sadly lacking in some instances are standards of practice and adherence to the core principles of transparency, independence and values.
In the past 15 years we have seen in Ireland the passing of the Company Law Enforcement Act 2001 and the establishment of the Office of the Director of Corporate Enforcement, as part of a framework for encouraging compliance with company law and investigation of suspected breaches of legislation. The Mullarkey report highlighted the need for good governance in State-sponsored bodies and the public sector. Best practice – the combined code – provides in great detail how an effective board of directors which has collective responsibility for the success of a company should operate. There is a regulatory framework in existence and we know what best practice dictates.
Adherence to high standards is not something that can easily be transcribed in law or in regulations; it can, however, be easily followed in practice once the ethical, value-based and principled decision-making process is evidenced in each and every board. This does presume that those appointed to boards are properly trained in the first instance and receive continuing professional development as well as performance reviews in their roles as company directors.
We need the best people on boards who can understand, interpret and apply these standards without fear or favour. We know that the key attribute which every non-executive director should bring to the boardroom is the ability to provide an independent, objective and external perspective and to ensure that their primary responsibility is to the company as a whole and not to each other.
What all bodies have at their core is the pivotal requirement that all directors fulfil their role to provide entrepreneurial leadership to the company within a framework of prudent and effective controls, enabling risk to be assessed and managed.
The board has collective supervisory responsibility, primarily to the company itself and the shareholders, but also to other stakeholders, including employees, lenders, customers, suppliers, the investment community and the public at large. Board members should only be appointed on the basis that they possess the requisite skills and expertise, complemented by knowledge and understanding of their role and responsibilities.
If we have learned anything at all from recent examples of corporate malfeasance, it is that we cannot rely on outdated concentric circles, golden or otherwise, as the recruitment ground for directors in Ireland.
Last autumn the Institute of Directors launched the chartered director programme in Ireland which trains and awards professional certification to company directors in Ireland.
This training is the gold star benchmark for all directors and will, we believe, lead to increasing professionalism of directors in Ireland and the parameters within which they undertake their duties. There is also a range of other excellent courses and training available which enable directors to learn best practice and to keep up to date on their responsibilities. Continuing professional development through regular attendance at courses should be a feature of all directors’ lives, so that they remain up to date with latest thinking of areas of relevance.
Recent scandals have only highlighted the need for ensuring that all directors retain the ability to remain independent and objective and to act in the best interests of the company.
Maura Quinn is chief executive of the Institute of Directors in Ireland, the representative body for senior business professionals and directors