City code hits 'ownerless' corporations head on

As the drive for robust governance continues, the onus has shifted (perhaps temporarily) away from the boardroom to fund managers and foreign investors of UK companies as the FRC unveils new City guidance designed to beef up the way shareholders communicate with business.

Whether or not the FRC's Stewardship code will actually reduce the number of badly-run companies out there, only time will tell. But what the code does mean is that fund managers and foreign investors in UK companies will for the first time be publicly accountable for how they monitor the boards and performance of groups they invest in.

Ultimately the purpose of the Code is to encourage more transparency about the way in which investors oversee the companies they own. It’s certainly an honourable objective, harking directly back to the 2008 banking crisis which prompted the then-City minister Lord Myners to criticise the investment community for failing to stop banks taking too many risks.

But risk taking is part and parcel of the investment process. And while the code does well to address head on Myners's accusation that the lack of action by investors led to the creation of "ownerless corporations", the risk-taking culture is alive and well. But what the Code does do it highlight the joint responsibility that the business world as a whole must shoulder for the mistakes of the past few years.

It’s interesting that Henley Business School has this week published perspectives from some of its leading management gurus urging a collaborative approach to leadership and the recognition that one person does not and should not hold all the answers or power. There is a need for robust governance and this should be backed by corporate structures that enforce that governance, the business school says.

The collection of perspectives from five of Henley’s leading academics focuses on the challenges facing the leaders of tomorrow.

One of the overriding themes is the belief that there will be a renewed emphasis on sincere, genuine, transparent, values-based leadership should This means the leader needs to empathise with values that reflect the priorities of all the stakeholders; employees, shareholders, community and society at large.

What’s clear is that significant changes are required by leaders who recognise the need to reshape and rebuild corporate contribution to economies, not just in the UK but across Europe and internationally. CFOs have an essential role to play in driving and overseeing that revolution. This week we meet Neil Harman, chief financial and commercial officer for financial outsourcer HML, about the business issues he faces, and his view on the future of finance.