25/01/12

By Andrew Holt

ACEVO's chief executive Sir Stephen Bubb has written to Vince Cable, secretary of state for Business, Innovation and Skills, expressing his pessimism about the likelihood that company boardrooms will change of their own volition in regards to executive pay and diversify the make-up of their boards.

Instead Bubb writes: "In my view, a radical overhaul of corporate governance is needed, including legislation to ensure transparent recruitment processes and proper steps to recruit from diverse backgrounds."

The letter in full reads:

Dear Vince,

I am writing to you about your proposals to curb executive pay, and in particular your plans to encourage more diverse representation on company boards.

In 2003 I was a member of the Tyson task force, set up by the then Department of Trade and Industry to consider how to encourage more diversity in our boardrooms. It followed the 2003 Higgs Report which sought to encourage better non executive governance.

It set out an unanswerable business case for recruiting and developing non-executive directors from different backgrounds and with a broader range of experience and skills.

Nine years later, little has changed. Consequently, I cannot help but be pessimistic about the likelihood that company boardrooms will change of their own volition. In the past, exhortation has failed to secure the much-needed culture change within business. Will it work on this occasion, when business has shown no willingness to make changes so far?

In my view, a radical overhaul of corporate governance is needed, including legislation to ensure transparent recruitment processes and proper steps to recruit from diverse backgrounds, with development opportunities and training and a monitoring system backed by a new Code of Corporate governance.

I suggest that your proposals to create more diverse boardrooms should place more emphasis on the need for a variety of professional experience and expertise among executives. In particular, the skills and experience of the many top rank third sector CEOs would be a real boost to any boardroom; they would bring a strong voice in favour of ethical behaviour and sustainable business practice, as well as unrivalled experience of motivating staff and engaging with stakeholders.

For years I and colleagues from our broad charity and social enterprise sector, full as it is of talent and expertise, have made this case only to be patronised or ignored. Tackling top pay abuse and securing a more engaged business sector requires new skills at the top. Exhortation has previously proved unsuccessful; now is the time for concrete action and proper reform.

Kind regards,

Sir Stephen Bubb

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