Join our community of smart investors
OPINION

The governance ghetto

The governance ghetto
August 31, 2017
The governance ghetto

Of course, this is a huge generalisation and examples can be found to disprove this thesis. One is Britain’s automotive industry, whose survival owes much to policies that brought Japanese car manufacturers to Britain in the 1980s. Without them Britain might possibly have no automotive sector to worry about in the ongoing Brexit negotiations; certainly British Leyland, propped up for many years with taxpayers' money, has not provided it. There are similar examples of failed state support within the computing industry – mainframe business ICL, for example, which received bailout after bailout merely because successive governments desired a ‘national champion’ in what was seen as a prestige industry. That support, it is argued, meant throwing good money after bad and distracted attention from what turned out to be the real growth area of microcomputing.

My project has also been a journey of self-discovery, and more than ever I realise that my inclinations lie towards the free market. Protectionism in the form of procurement support – mandating state-influenced businesses to buy British even if that technology was inferior to imports – meant that our industries were not able to fully unleash the benefits of such technologies. This is less of a problem today, but government intervention is alive and well, and not always helpful – and I am terrified that in their panic to fend off a Labour challenge the Conservative government veers towards such policies.

Take the ongoing debate around excessive executive pay, for example. I remain unconvinced that all senior executives warrant their mega pay packets, but is this really a matter for government? A private company should be run in the way its management sees fit, and allowed to pay its executives what it likes, or rather what its shareholders allow. And that is an area where government does have a role to play but where it is falling well short, because it remains the case that the voice of small shareholders is still barely heard – perhaps because it suits the City lobby to retain the status quo. I’ve said it numerous times before, but it is worth repeating: our nominee system is not fit for purpose, and the introduction of a new approach that fully empowers private shareholders is long overdue. As ShareSoc puts it, rather than wishy-washy corporate governance reforms, it is only from the bottom up that management can be held to account for the good of everyone.