Risk and rules are vital foes  Trade-offs are essential at the tops of firms

There was never a dull moment when he was in the room. As a host over lunch at the Athenaeum Club, he could be mischievous – and, occasionally, even scandalous. He spoke plainly about the realities of leadership, management and business life. He was a wonderful source of ideas and stories for any journalist.

Corporate governance was where my journalistic career began. The first significant press conference I attended as a young hack was when Sir Adrian Cadbury launched his report on the ‘financial aspects of corporate governance’ in 1992. Corporate disasters at Polly Peck, the Bank of Credit and Commerce International, and Robert Maxwell’s Mirror Group formed the backdrop to this important moment in governance reform. But few would have guessed that Cadbury would be the start of an extended programme of reports and regulatory change that would stretch beyond the subsequent three decades.

Cadbury was followed by Greenbury, Hampel and Higgs, among others. A ‘combined code’ of corporate governance was established (now called the UK Corporate Governance Code). It was overseen by the Financial Reporting Council (FRC), with the ‘comply or explain’ principle at its heart. Meanwhile, the FRC has (theoretically) been on borrowed time since 2019, when the then government agreed to replace it with a revised Audit, Reporting and Governance Authority (Arga), as recommended by another grandee name – Sir John Kingman. But there has been a bit of aggro about Arga, or at least confusion and delay: an Arga saga, if you will. The new government remains committed to launching it. Eventually.

Why does the issue of corporate governance still cause so much angst, so much dither and disarray? There is a huge paradox in all this. On the one hand, nothing could be more important than how our companies are led, managed and run. Everyone agrees that this stuff matters. And yet (misguided?) good intentions and unintended consequences characterise what remains a suboptimal situation.

The pendulum swings back and forth. Crises and scandals lead to calls for crisper, more effective regulation. But businesspeople quite reasonably baulk at unnecessary red tape and the tyranny of ‘box ticking’. We say there is a crisis of trust, but then insist on increased scrutiny of the boardroom. And all the time, auditors fail to notice governance failures, such as those at Carillion, BHS and Patisserie Valerie. The public sector has seen more than its fair share of governance scandals too: subpostmasters and the Post Office/Fujitsu/Horizon disaster; and crazily expensive (and flawed) ‘track and trace’ systems during the Covid pandemic come to mind.

A recent report from the Board Intelligence consultancy, called The Board Value Index, found that almost 50% of directors felt their boards were not adding enough value. Only 23% said their boards were operating at their full potential. Necessary governance, compliance and risk management may take energy and focus away from more forward-looking discussions about value creation. “The outcome of a high-performance board is reflected in the success and prosperity of the business itself,” according to Pippa Begg, cofounder and chief executive of Board Intelligence.

A frivolous thought comes to mind. Maybe part of the problem with governance is the word itself. It just sounds so heavy and drab, rather like a synonym for ‘fun police’. We want entrepreneurial boards to encourage judicious risk-taking and wealth creation. But we also want to avoid having tyrannical bosses, greed and scandals. We hate box-ticking, but we need some rules. People are flawed and will sometimes get things wrong. How can we control that? This is a tough nut to crack.

In a letter written not long before he died, Sir Adrian told Bob Garratt – an admired governance expert – that the drive to improve corporate governance (launched by his own report) had all got a bit too involved and burdensome. Two new books make a strong and practical case for better governance. The Purpose-Driven Organisation in Times of Climate Crisis, coedited by Katie Bailey and Katie Manning, and Beyond Profit: Purpose-Driven Leadership for a Wellbeing Economy, by Victoria Hurth, Ben Renshaw and Lorenzo Fioramonti, both make it plain that competent and effective governance is a non-negotiable. It really matters how businesses operate. It is neither optional nor trivial.

None of this would have come as a surprise to Kakabadse. He knew better than anyone about the trade-off s that necessarily exist at the top of organisations. He would have known that the work on improving governance would have to go on long after he did. A brief message on LinkedIn announcing his death, posted by his wife (and academic partner) Nada, was met with an overwhelming global response. Hundreds of messages of sympathy and gratitude were posted. Corporate governance remains incredibly important. As Kakabadse might have said, we just have to keep trying to get better at it.