Drinks company Diageo has topped the latest rankings for good corporate governance from the Institute of Directors (IoD) in its third annual review of the UK’s top 100 companies.
The 2017 Good Governance Report was compiled for the IoD by Cass Business School and examines a range of 47 factors relating to how companies are run, including board diversity, directors’ pay, how long the business has been with an auditor and whether they have a whistleblowing policy.
Ken Olisa, deputy chairman of the IoD, and chairman of the Good Governance Report advisory panel, said: “Corporate governance has rarely been out of the headlines since we first set about creating a way to rank the UK’s top companies’ performance in 2015, and with each scandal pressure grows for the imposition of tougher regulation along with calls to report statistics of dubious merit. This is the wrong approach. Corporate governance is about much more than compliance – it’s about achieving competitive advantage.
Our hope is that British boards will embrace the underlying subtleties of the third Good Governance Index and so 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 that the number of measures examined has been expanded this year to provide an even more comprehensive view of how well the company performs for its shareholders, employees and customers. The IoD’s report combined publicly-available data with over 2,000 rankings of the companies given by individuals with knowledge of what good governance looks like, including members of the IoD and the Chartered Quality Institute (CQI), company secretaries and accountants. The final ranking is weighted based on the perceptions of the different measures, with audit and risk being seen by governance experts as the most important.
Estelle Clarke, executive director: policy at the CQI, which supported the IoD’s project, wrote in the report that measurement has moved from a commitment to a policy to actually ensuring companies deliver on those policies. For example, one of the new measures sought confirmation that an organisation is a signatory to upholding the UN Global Compact’s 17 sustainable development goals. Following this, the web-based tool, RepRisk, was used to assess whether these organisations were actually meeting their obligations throughout their operation, every day of the year.
The other companies that achieved scores putting in the top 10 of good governance in 2017 were Aviva, GKN, Barclays, Smiths Group, Prudential, RSA Insurance Group, International Consolidated Airlines Group, InterContinental
Hotels Group and Compass Group. Last year’s top-ranked company, British American Tobacco dropped down to 19 in the governance index.
The IoD said there was no particular correlation between the good governance score and company size. However, the research found that the average score of companies from the energy and utilities sector was significantly higher than the overall mean score. In contrast, the average score of the information technology sector is significantly lower.
Last Updated: 13 October 2017