UK: EDITORIAL - MATTERS ARISING FROM 1995'S AGENDA.

UK: EDITORIAL - MATTERS ARISING FROM 1995'S AGENDA. - Looking back at 1995 three key management issues stand out. One was in the forefront of media coverage, although it generated far more heat than light. The second has been rumbling along for some time

Looking back at 1995 three key management issues stand out. One was in the forefront of media coverage, although it generated far more heat than light. The second has been rumbling along for some time but only achieved critical mass this year. The third is probably the most complex problem that managers have had to confront in decades.

The first is corporate governance. The majority of shares in most major British companies are firmly in the hands of institutions which take little proprietorial interest in them. In other words the companies have no effective ownership. So who should set their goals, and what should these goals be? The RSA's report on 'Tomorrow's Company', the Myners Committee and other august bodies considered and recommended, but it was the 'fat cats' and their salaries which became the focus of the debate. Discussion of the relative importance of different 'stakeholders' simply dissolved before the assault on the likes of British Gas's Cedric Brown. Until it's clear to whom boards must answer, and according to what criteria, business will be at the mercy of uninformed critics with a penchant for knee-jerk reactions.

The second issue concerns wider recognition of the concept of shareholder value. Assessing companies according to their ability to use capital to make more capital is hardly rocket science. Many companies established appropriate measurements and began using them as a basis for operational decision-making several years ago - Lloyds Bank is notable as a company which has outperformed its peers because of its awareness and application of such measures. This year the bandwagon picked up speed, bringing a spate of share buy-backs and special dividends. Managements that prefer not to focus on shareholder value not only risk making poor investment decisions, they may in future find their performance is judged against criteria which they are not monitoring.

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