The decision in 2005 of the then UK Chancellor Gordon Brown to cancel the requirement for an Operating & Finance Review was ‘an inexplicable mistake’, Anglo American chair Sir Mark Moody-Stuart told delegates at a lecture hosted by the Worshipful Company of Management Consultants on 11 March.
‘Having had serious concerns, we business leaders had come to think that we could probably handle it; to have some statement on strategy. People had been worried that they would have had to put in all the details in the front of the annual report,’ he said at the event, sponsored by consultancy RogenSi.
The Operating & Finance Review would have committed listed companies to provide fuller narrative information to investors and other external stakeholders about a company’s strategy and activities, and would have included human capital reporting. Its cancellation put a brake on development of human capital reports.
Mr Brown dropped the requirement, on the basis that it would have been ‘red tape’ for business. It was never clear that business leaders had complained at the supposedly onerous nature of the requirement – Sir Mark’s comments now further undermine the Government’s case.
In his lecture, Sir Mark argued that business leaders are often not opposed to the objectives of social responsibility legislation – more to rules that are overly prescriptive. The best results come from a combination of clear deadlines for certain measures, and effort to change hearts and minds – rather than relying exclusively either on Government force or on the market.
The problem with the banking failures and credit crisis arose from the common phenomenon of an ‘imperceptible shift of a value system’, in which increasing levels of risk were gradually normalised, and accepted throughout the banking industry and among regulators. The best way to guard against such collective failure on boards is to have at least one or two outsiders who are prepared to ask awkward questions, he said.


Weblinks
Worshipful Company of Management Consultants: www.wcomc.org.uk
RogenSi: www.rogensi.com