Box ticking is a bad way to improve corporate governance.

Letter to the Financial Times

1 February 2020

Letter to the Financial Times

Melanie Wadsworth’s article “Box ticking is a bad way to improve corporate governance” (FT, February 10) raises issues of great importance to the improvement of corporate governance. But there are a couple of matters we continue to ignore.


The first centres on directors’ duties. Section 172 of the Companies Act 2006 states in very clear English what is expected of directors in relation to the company’s stakeholders. But the courts have failed to develop case material to provide guidance in terms of specific actions and approaches. Point 1 of section 172 is a good example. The director must in good faith act to promote the success of the company. In practical terms what does this mean? Has this ever been settled in law? The answer is no.


A second point concerns our reliance on executive-dominated unitary boards to explore what this means in practical terms for the directors in discharging their duties. Until we adopt independent supervisory boards these matters will never be satisfactorily addressed, Box ticking will continue.


Richard Tudway

Principal

The Centre for International Economics