Sir, – Although former Bank of Ireland chairperson Laurence Crowley (Interview, September 2nd) acknowledges that some mistakes were made, he broadly proposes returning to a failed process of appointing non-executive directors to Irish corporations.
Mr Crowley argues that you’d normally be hesitant to appoint somebody you’d never heard of; and goes on to state that we need to preserve the cohesiveness of the board.
On the contrary: the suggestion that board members should not look beyond those they have heard of is a recipe for groupthink.
The risk is that a lack of diversity encourages members of the board to ignore alternative evidence when making decisions in order to facilitate consensus or promote the cohesiveness referred to by Mr Crowley.
Many stakeholders, including shareholders, employees and customers have never heard of the people on their boards of management, whose decisions and oversight is meant to protect the long-term prosperity of the bank, company or public body in question. We need to ensure that boards are representative of all stakeholders.
TASC's report ( Mapping the Golden Circle, 2010) examined Ireland's 40 top public and private companies and found that a network of 39 individuals held multiple directorships on at least two boards across 33 of the companies examined. We also found that executive pay increased by 46 per cent in private companies between 2005 and 2007, while State executive pay mimicked this trend. Given the colossal failures by banks and other bodies, it is hard to understand Mr Crowley's arguments against capping executive pay.
Weak corporate governance contributed to the current crisis, and good corporate governance will underpin economic recovery. We need independent appointments to public bodies and tangible change in how private corporates are governed, with real stakeholder involvement underpinned by legislation.
A study of the top 50 companies in the UK before and after the economic crisis showed a sharp increase in the number of non-executive directors. The UK government is also making moves to increase the representation of women on boards in the FTSE-100.
To date, Irish companies and public bodies have largely failed to make similar improvements. – Yours, etc,