Global drinks firm tops good governance rankings

The IoD has released a Good Governance Report highlighting firms that are performing well at a governance level. The IoD is concerned that compliance fails to achieve a competitive advantage.

Drinks company Diageo comes first in Good Governance Report
International drinks company Diageo has topped this year’s Good Governance Report – the Institute of Directors’ (IoD) rankings for the corporate governance performance of the UK’s largest listed companies.

IoD aims to move conversation away from compliance

Compiled for the IoD by Cass Business School and the Chartered Quality Institute (CQI), the report is based on almost 50 different criteria on how companies are run, including board diversity, directors’ pay, how long the business has been with an auditor and whether they have a whistle-blowing policy.“Its purpose is to encourage the study of good governance among UK companies and stimulates public debate on the importance of corporate governance in rebuilding the reputation of the UK business community,” said the IoD.“The purpose of this project is to reignite the governance debate by leading it away from the compliance approach to corporate governance that has become widespread in recent years. Our novel approach is to combine traditional governance indicators with a measure of the quality of corporate governance as perceived by stakeholders.”Diageo, owners of brands including Guinness, Smirnoff and Johnnie Walker, topped this year’s rankings of blue chip companies ahead of a top 10 made up of Aviva, GKN, Barclays, Smiths Group, Prudential, RSA Insurance, IAG – the owner of British Airways and Iberia – and InterContinental Hotels.

Corporate finance more than just compliance

Ken Olisa, deputy chairman of the IoD who heads the good governance report advisory council, said, “Corporate governance is about much more than compliance – it’s about achieving competitive advantage.“The good governance initiative is intended to assist boards to understand the implications of the many indicative factors which, in aggregate, determine the quality of corporate governance. Our hope is that British boards will include as a regular agenda item, discussion of how well their company’s high-level system of direction and control is contributing to the business’ success.”The IoD said the size of an organisation seemed to have no effect on the position in the 103 companies studied, and pointed out that top-ranked businesses can from a variety of sectors. Overall, energy companies outperformed compared to the average score, while IT companies underperformed.
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Estelle Clark, director of policy at the CQI, said the research demonstrated that good governance was not a matter of resources but of culture and will. “We must now extend the discussion into the FTSE 250 and beyond, into private companies and even public sector organisations. When the connection between the board and operation of a business is lost, we all lose.”Ranked in last place on the list was pharmaceutical giant GlaxoSmithKline as a result of a recent bribery scandal and excessive pay policies. Mr Olisa said that GSK had had “lots of issues” in recent years, including a scandal that allegedly saw it make illegal payments to doctors in China in a bid to boost sales, as well as controversy over executive pay after former chief Sir Andrew Witty saw his salary soar despite a drop in earnings.A full list of the rankings can be found on the Institute of Directors’ website.For related news and features, visit our Enterprise section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory  

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