Corporate governance back on the agenda

June 28, 2011

The European Commission has published a green paper on corporate governance with a view to unifying best practice among Member States.

The European Commission’s green paper discusses three subjects which it considers to be at the heart of good corporate governance:

  • the role of the board of directors;
  • the role of shareholders; and
  • how to apply the “comply or explain” approach which underpins the majority of domestic corporate governance frameworks.

In each category, the green paper outlines the Commission’s general view and asks questions as to the policy options.

When it comes to the role of the board, the Commission emphasises the importance of clear divisions of responsibility between the board and the CEO, and of maintaining a diversity of board members. It also considers the requirement to appoint an external facilitator to help evaluate the board’s performance (something which is already included in UK best practice for FTSE 350 companies) and asks whether shareholders should have a greater say in the remuneration of board members.

Among the qualities which the Commission considers important for effective non-executive directorships is that the individual has sufficient time to devote to their role. The paper asks whether there ought to be a limit on the number of mandates that a non-executive director may hold.

Many non-executives and aspirant non-executives will have looked at the long lists of directorships held by the ‘great and the good’ with dismay and frustration wondering exactly how they can discharge their duties effectively.

The Commission’s discussion on the role of shareholders focuses on ways to encourage engagement and discourage short-termism. This part of the green paper strongly echoes the British Government’s consultation on the future of corporate governance in the UK .

The Commission voices a concern that the fee structure of asset managers is contributing toward short-termism.

The third major area discussed in the paper is the use of the “comply or explain” model. This is supported as the most appropriate way for delivering good corporate governance.

However, the paper also discusses areas where the model might be improved. The Commission cites a recent study claiming that explanations by companies which deviate from best practice are often insufficient. The paper asks whether monitoring agencies should check these explanations to give greater power to shareholders and whether more detailed explanations should be required when a company departs from the code.

It is unclear what route the Commission will pursue once it has reached its policy conclusions. Options include issuing EU-wide best practice guidance or legislation, or encouraging Member States to adopt their own individual codes.

One thing is clear – given the abject failure of the Banking community to regulate itself the EC’s attempt to strengthen corporate governance in the financial sector is a welcome and timely initiative.


Private hospitals are no place for people with learning disabilities

June 28, 2011

22 June 2011

Three weeks on, the fallout continues from BBC Panorama’s exposure of sickening abuse of people with learning disabilities at the Winterbourne View private hospital near Bristol. Already it –is clear that the programme will come to be seen as a key milestone on the long journey to a civilised system of care and support for this section of society.
On Wednesday, more than 80 leading figures in the learning disability sector lend their names to a letter to the prime minister demanding an end to the placement of people in such facilities. There is, the letter says, “no place for hospitals such as Winterbourne View” and seeking to improve them will not do. “The model is wrong and does not work.”
Closing all NHS long-stay hospitals for learning-disabled people in England was a historic, if tortuous, achievement. But as Panorama has shown, some people are now sent to equivalent units run by private companies which, like Winterbourne View, masquerade as short-term assessment and treatment centres. There was nothing short-term about the placements in the programme, nor was there much evidence of assessment and treatment.
There was, however, plenty of evidence of the kind of physical and verbal abuse that was all too common in NHS units such as Orchard Hill in Sutton, south London, which was the last hospital of its kind to close, in 2009, after having itself been exposed two years earlier for a regime of physical and sexual abuse of people who lived there.
The link between Winterbourne View and Orchard Hill, and with an earlier NHS scandal in Cornwall, is made in today’s letter to David Cameron. The learning from past inquiries “appears to have been forgotten”, say the signatories, who include former government policy advisers Rob Greig and Jim Mansell, “in part because of the continual reorganisation of public services”.
The letter calls for the phasing out over two years of placements in private hospitals, with commissioners of care “prevented” from making any future such arrangements. In the meantime, it says, inspectors should ensure a “dramatic” reduction in use of restraint techniques in the hospitals and an opening-up of their culture. All people placed in the hospitals should be guaranteed independent advocacy.
Forestalling the inevitable ministerial response that these are matters for local decision-making, the signatories say: “The underpinning issue is one of the overall service and system design – hence the need for government to take a lead.”
Handily, powerful evidence has emerged this week to lend weight to the letter. Publishing an evaluation of how the last Orchard Hill residents have fared since they moved to live with support in the community, Sutton council says they are happier, fitter and enjoying far greater independence, dignity and control over their lives. Oh – and their care and support costs are almost a third less.
Bear in mind that these last 39 residents of Orchard Hill were considered the most dependent and challenging people placed there. One woman had a vocabulary of only 40 words. Today, she has command of one exceeding 1,400. The evaluation, carried out by the University of Chester, found “significant” improvement in the group’s quality of life within just six months of leaving the hospital. Within 18 months, it had risen by a third.
“People are making the most remarkable progress, beyond all expectations,” says Colin Stears, the council’s executive member for adult social services. “Returning people to their local communities by making supported living a reality has restored the human rights of people with learning disabilities, many of whom have very complex needs.”
Cameron, whose disabled son died two years ago, is said to have been distressed by the Panorama programme. He should need no further persuasion to stop the worst of old-style NHS institutional care, something we thought we had left behind, being replicated by the private sector at places like Winterbourne View.
• David Brindle is the Guardian’s public services editor. He is a trustee of NDTi, a not-for-profit agency that works in the learning disability sector.


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