Improving corporate governance – it’s the people, stupid!

By Ben Willmott, Head of CIPD Public Policy, @Ben_Willmott


One issue that has not been at the forefront of political agenda in the run up to the General Election has been corporate governance, which is perhaps not surprising given the attention taken up by the big debates about the economy and the NHS.

Even in the detail of the party manifestos, little attention has been paid to this issue. Of the parties that have included any positions on this, the Labour Party has pledged to ‘Reform corporate governance to protect leading firms from the “pressure to put ‘tomorrow’s share price before long term growth potential’. The Liberal Democrats have promised to ‘Change company law to permit a German-style two-tier board structure to include employees’ and to create a ‘Right for employees who collectively own 5% of a company to be represented on the board.’

However, given the recent spate of scandals in the banking and media sectors, as well as the patient care crisis in the NHS, the CIPD believes that more needs to be done by the next Government in order to improve transparency over how our big corporations and public sector organisations are led, managed and invest in their people.  

Most recent high profile corporate failures were not just the result of inadequate regulation, but stemmed from poor understanding from senior executives of issues such as organisational culture, leadership, people management and development.

Joint research by the CIPD and the Chartered Institute of Management Accountants (Valuing your Talent, 2014) suggests that one reason for this lack of insight is that the current capability of many organisations to understand the value of critical intangible assets such as their human capital is extremely limited. Too few organisations use human capital Management (HCM) metrics to help understand how to make the most of their investment in people to support the execution of their business strategy. There is also limited interest from key stakeholders such as government, regulators and investors in the external reporting of such information (Investing for Sustainable Growth, CIPD 2015), which means there is little demand for corporations to report on this data.

In the CIPD’s view, one way to address this is for government to set voluntary human capital management reporting standards for FTSE 350 organisations on core agreed human capital measures such as overall cost of workforce investment, recruitment costs, total investment in training and development and employee engagement scores. A focus on improving the consistency and quality of HCM reporting by organisations has the potential to, over time, provide trend and benchmarking data which can be used to provide valuable insights into the link between investment in human capital and sustainable business performance.

In addition, government can lead by example by ensuring that consistent HCM reporting is embedded in the annual reporting of all public sector organisations as a means of providing more insight into how the public sector invests in and manages its workforce to improve resilience and drive value for service users and tax payers.

Improvements in how organisations generate and analyse human capital data can provide greater transparency into whether corporations are led responsibly for the long-term and useful insights to help improve workforce investment, business performance and, ultimately, UK productivity.

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  • Anonymous

    I thought CIPD and the Accounting bodies were supposed to be working together on this. The place for it is in the Sustainability Report, in which people issues should be reflected. ( dare I say it also to include contribution to sustaining the labour force)