January 2017

Transparency In Executive Pay, Shareholder Engagement and Building Trust. The Role Reputation Should Be Playing In Corporate Governance


Today the Financial Reporting Council begins to mark 25 years of the UK Corporate Governance Code. It has issued a report assessing the governance and stewardship standards among companies in the UK and the quality of compliance and reporting.

Standards of UK corporate governance have rarely been under more scrutiny. With BHS and Sports Direct currently under the eye of an BEIS Select Committee, issues such as transparency in remuneration, strengthening the voice of the wider shareholders, increasing engagement, the role of culture and building trust, are all high on the ‘corporate governance’ agenda.

To us, while the principle of the Governance Code is good, it is beginning to look each of its 25 years old. What they are seeking to achieve can be much better and more effectively reported on than through a response to a comply or explain code.  

Reputation measurement is a complete, mosaic picture of insight and evidence, collected from all those with an interest in that company, about all aspects of its behaviour and performance.

Where the comply and explain principle is a two way question and response ‘tick box,’ reputation measurement provides the ability to evidence, compare and contrast the beliefs and perceptions, by stakeholders, about every aspect of the company.

It doesn't just tell you ‘yes’ or ‘no because…’ Reputation measurement allows you to see and understand why.  From then, change can occur.

Reputation measurement recognises the relationship that exists between the differing stakeholder groups and the differing measures of corporate governance. It allows organisations to:

  • Assess the beliefs and perceptions held towards it across all stakeholder groups, not just shareholders.
  • Contrast how every aspect of the organisation, from leadership, trust, engagement and conversations such as remuneration are seen to be performing across all those differing stakeholder groups.
  • Compare the difference between internal employees (culture) and the external audiences; for strong reputations both internal and external audiences must align. The external audiences also have perception of culture.
  • Quantify and qualify the attitudes and beliefs against each corporate governance principle, by stakeholder group.
  • Evidence the levels of engagement across wider stakeholders and the success to which the stakeholders’ voices are being heard and represented.
  • Idenitfy the changing emotions held about the organisation by stakeholder groups.
  • Quantify the levels of trust and identify the drivers of detractors of trust.
  • Define, predict and prioritise risk.
  • Better understand the nature of the conversation and the drivers around topics such as the remuneration agenda.
  • Know what is changing on a daily, monthly and annual basis and why. 

And much, much more. 

These aspects of culture, trust and engagement cannot be treated as stand alone measures. A fragmented, tick box approach surely isn’t good enough any longer as a measure of corporate governance in an era when reputation insight is possible.