LBS expert calls for good corporate governance

David Pitt-Watson corrals support from industry bodies in letter to the Prime Minister


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David Pitt-Watson, Executive Fellow of Finance, London Business School, is urging the UK government to take a tougher stance on corporate governance.

Writing in the Financial Times, Pitt-Watson asks that the government find a way to police corporations’ legal obligations, which currently can be “breached with impunity”.

“The duties of the boards of directors who run British companies are well defined. They are to promote the success of the company for the benefit of all shareholders, and in so doing to have regard for the interests of workers, consumers and other stakeholders,” says Pitt-Watson.

Pitt-Watson coordinated a joint letter to the Prime Minister, Theresa May, on behalf of the Institute of Directors, the Trades Union Congress (TUC), the International Corporate Governance Network and the Institute of Chartered Secretaries and Administrators.

Collectively they argue that the government should create a regulatory body, helping to ensure businesses benefit staff and society as well as shareholders.

“This proposal simply asks that those who are protected by law can ask that the law be respected. Such a proposal is complementary to the role of investors in shareholder stewardship. Such stewardship is an important part of our governance system. If it is done well it will help prevent bad practice. But it is not the job of any investor to police the law. And for small investors it is impossible.”

Pitt-Watson points to other industries such as broadcasting, where mechanisms exist for people to complain.

“Companies that breach obligations hit the headlines and bring the system into disrepute. It is no use telling those who have suffered that they shouldn’t worry because most businesses behave well. They need to have someone to complain to, who is free of conflicts and who can set things straight,” Pitt-Watson says.

The full letter appears in the Financial Times.