Report and Feedback on the Post-Higgs Report lunchtime at Scottish Widows. This event featured Ian Percy as the interviewee and Gavin Gemmell as the interviewer.

Stop press additional information available to us April 04:

A Scotland on Sunday article of 28 March 04 headed “Scots firms urged to adopt good governance guidelines” and a Sunday Times article the same day inform us that law practice Burness (well known to OASIS), the Institute of Directors Scotland, PricewaterhouseCoopers (also known to OASIS) and Scottish Enterprise have joined forces to create the first website of its kind dedicated to corporate governance. This most useful website for the newly formed Corporate Governance Unit can be accessed free via www.scottishdirector.com

Ian Percy is Chairman of Kiln plc and a special adviser to the UK Government on accountancy matters; he also holds a professorship at Aberdeen University. Gavin Gemmell is the erstwhile head of Baillie Gifford and is now the Chairman of Scottish Widows. Both men serve as non-executive directors on several boards.

About 50 gathered in the lecture theatre of Scottish Widows to hear Ian Percy and Gavin Gemmell speaking on corporate governance issues in the light of the Higgs Report and the combined code, a new self-regulatory regime under which companies must "comply or explain".

To give us an idea of what the combined code is about, here is a paragraph lifted from Scotland on Sunday's Business section of November 16th, page 13:

"Directors' duties come under the spotlight

Seven out of the 17 main principles of governance address the board and its directors and emphasise, among other matters:

· collective responsibility;

· separating the roles of chairman and chief executive, avoiding any one individual having unfettered powers of decision;

· balancing between executive and non-executive directors including independent non-executives;

· transparency of procedures for appointment;

· induction and professional development;

· evaluation of director performance;

· regular submission for re-election, including non-executive directors"

We learned much over this lunchtime, starting with the different board structure traditions as between Britain, the US and mainland Europe. We then learned about the purpose of corporate governance and the role of some of the committees at the top of a company.

However, the first point Ian Percy made was that the purpose of any company within the private sector is to create profits, primarily for shareholders but also for other stakeholders - notably employees. In this country we have unitary boards with a separate chairman and chief executive and strong non-executive directors. Developing a clear strategy, setting targets, and ensuring R & D - such matters are the remit of a board. Also in its remit are sustainability rather than short termism, and the appointing and overseeing of the proper management and human resources to achieve the company's ambitions.

The role of management is to implement the board strategy and to run the company well.

Board and management have to act with integrity. If we all heeded the Biblical injunction: "Do unto others as you would have them do to you", we would not need a combined code. However, we have one.

To assist the board in its governance role and to underpin integrity, there are generally three committees, largely made up of independent directors: the Nominations Committee, the Remuneration Committee and the Audit Committee.

We heard quite a bit about these, and also about the pressures, sometimes subtle, bearing down on board members and then onto management. But to help you and me discern whether we can go along with the pressures or whether any particular one is illegitimate, we can resort to two tests: "Will this pass the Daily Record test?" and "Can I explain this without embarrassment to my family?" The answer to both tests needs to be yes. What to do in the case of a "no"?

If there is illegitimate manipulation of information for short term purposes, a person who comes to know this may need to blow a whistle, no easy thing. But to fortify us in our resolve, we may like to note that only this last week the chief whistle-blower over the EU's financial mismanagement has been acclaimed by the rest of her profession across the world. Whether we come in for acclaim or not, our integrity must be maintained. However, this need not lead to a public scandal. It may be that, by talking to a trusted friend inside or outwith our company, we can see a way to maintain our integrity and to bring about the necessary correctives without having to "go public" in the company, become known as the whistle-blower and become party to public exposure of unacceptable practice.

Iain Archibald of OASIS pointed out that both Ian Percy and Gavin Gemmell are on public record as having said at a previous OASIS lunchtime that they are happy and willing to be approached privately by anyone sensing they are under undue pressure and feel the need to talk over an issue in confidence. Iain Archibald also stated that there were at least two or three other people in the room who he knew would offer themselves in a similar way as confidants. We need none of us feel overwhelmed in our isolation. OASIS is happy to act discreetly as a broker or confidential relationships.

The Q and A time brought up several key points, and here is a flavour of just some of them:

· are we not living more and more in a rip-off culture where e.g. utility companies and banks are often slow to pass on savings or better rates of interest?

· does that maybe engender a culture in many of "If they can do that, I feel justified in taking this [dubious] action"?

· are we with these new requirements in danger of over-regulation, mere box-ticking and the stifling of entrepreneurial flair and commendable initiative?

· have some shareholders of late not overstepped the mark and interfered where they should not have?

· are some shareholders in fact mere investors who may be here today but gone tomorrow?

One clear thread seemed to run through all the points: there is no substitute for personal integrity and corporate integrity, and communication, communication, communication is key - e.g. between shareholders and a board, between a board and management.

At the end of the lunch hour Ian Percy, a founder of OASIS and on the Support Group for OASIS, had great pleasure in announcing that St Cuthbert's, the church behind OASIS, has invited Fiona Hutchison, currently an Assistant at St Cuthbert's, to become the Associate Minister at St Cuthbert's from 1 January 2004. Fiona will spend more than half of her time doing work in the OASIS / business environment, offering a listening ear, pastoral care and general chaplaincy services. She also looks forward to exploring other ways in which St. Cuthbert's can serve the people working in the offices around the West End, Lothian Road and the Exchange. Fiona will bring much experience to this post, including 12 years with the Bank of Scotland in London.

Fiona was herself present at this event in Scottish Widows and spoke briefly to all present, saying how much she is looking forward to the new job and to getting to know the staff in the businesses and offices in the area.

All present expressed their appreciation of Ian Percy and Gavin Gemmell for their expertise, time and preparation for this lunch hour, and of Scottish Widows for hosting us.

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