Corporate Culture and the Role of Boards

There are valid questions about how effectively existing corporate governance arrangements address the board’s responsibilities to stakeholders other than shareholders, as envisaged in the Companies Act 2006. The framework of corporate governance in the UK is based on a shareholder primacy and value model of equity capitalism. There is a continuing debate about what this means. One view is that it necessarily involves a short-term focus since shareholders are most interested in the certainty of more immediate financial returns. This inevitably has consequences in terms of the decisions and actions which companies and investors take. Short-termism can drive poor business behaviours and conduct, for example: inappropriate incentives, market-rigging, poor customer service, low levels of investment and opaque financial structures and arrangements.