Alan Campbell writes:
June 2017: Alan's Lecture in Kazakhstan

On Tuesday 13th June I was in the Samruk-Kazyna Corporate University in Astana, Kazakhstan. Samruk-Kazyna ( ) is the sovereign wealth fund of Kazakhstan and the university is part of its governance training programme.

It was my first visit to Kazakhstan and its new capital city - Astana. With its mineral wealth and strategic aim to be the cross roads of Asia and Europe, the city is alive with youth and an enthusiastic optimism. Magnificent new buildings, a tradition of hospitality and a desire to create an exciting future have produced a dynamism I have not seen for a long time.

At the same time the city was hosting the 2017 World’s Fair and international economic forum. The Silk Road is coming alive again.

The lecture was organised by Assel Alpyssova and her colleagues in the Corporate University Sarmuk-Kazyna. She is studying ICSA and briefed me on the Kazakhstan Corporate Governance Code developed with the OECD, adopted in 2016 and currently being introduced by Kamruk-Kazyna. Kazakhstan will be launching its International Finance Centre next year. So all is moving fast in the country.

Many thanks to the University team who set up the rooms, advertised the venue, and organised the translator who sat in a glass box next to me. We had chosen three topics for the evening: the ICSA: what it stood for and its history; the importance of Adrian Cadbury to the rise of the Code rather than the law; finally an introduction to common law, equity and the rise of the trust.
My thanks go to a delightful audience and another first – signing a set of notes!!

Interestingly the next day the following article appeared in the Astana Times.
“Kairat Kelimbetov the governor of the Astana International Financial Centre. By Jan 1 2018 Astana will have a fully functional financial centre (the Astana International Financial Centre – AIFC) with a world class exchange infrastructure, independent financial court and arbitration procedure, regulator and other key bodies. The court and arbitration centre are very important features of Astana IFC : we will be working in an independent legal framework based on the principles of English Common Law….. We need judges and lawyers who have experience in working in an Anglo-Saxon jurisdiction”. What a coincidence.

I had a wonderful time in Astana. Probably I was spoilt by the weather which was hot when for many months of the year, snow is the order of the day. But the people, the Opera House, museums and finally the wide open Steppe with the wind cooling your face made it a very special visit.

If you want to know more send us an email and we will try and help.

Astana slideshow

November 2016: The Company Secretary

End of the year thoughts….

With the Institute expanding its name to “ICSA – the Governance Institute” and rumours of further changes I was reminded of something similar happening when I first started teaching the qualification. Originally you studied and became a Chartered Secretary but then people were worried that friends and family would be upset by the word “secretary”. “After all,” they would say, “You do more than take dictation”.

The people that mattered knew who you were- the person in charge of the secretariat and you carried out “administration”. So the name became the Institute of Chartered Secretaries and Administrators. And the Education department under David Lilley took this very seriously indeed with a separate examination in “Professional Administration” with explanations of how administration differed from management. You practised “secretaryship” and we taught what was expected of you as the head of administration.

From the 1920s there had existed the Royal Institute of Public Administration which lasted until 1992. ICSA collaborated with the Institute of Business Administration to produce qualifications for The Institute of Business Administration and Management (IBAM). But these have gone the way of other administration qualifications and faded into history.

Today the new skill required is “governance.” With the FRC leading the way “Governance” and “Good governance” is what we do.

And I ask myself “Will this last or will it go the way of ‘administration’?”

One thing is certain though: from the time the first Mesopotamian secretary put his stylus into the clay tablet, through Henry VIII’s First Secretary Thomas More, to the highest ranks in Government today, one job has never lost its importance, or its name, or its function and that is the secretary.

I was reading Dominic Lawson’s article in the Sunday Times of 4th December and was struck by the importance of the Lyons Electronic Office: LEO. He writes “Fully three years before IBM achieved the same in the United States, it was, remarkably a British catering firm founded in 1884 that launched the age of commercial computing.”

As a little boy in the 1950s Lyons Tea Shops and corner houses were a part of any trip to London. They were as much a feature of the city world as McDonalds is today. More amazingly Lyons had brought in a business computer system to speed up the process of branch ordering and so sophisticated was it that the company had to lend it to Ministry of Defence boffins working on the UK’s nuclear defence system. Where had the idea come from? Who had suggested to the board of directors that they should look at a scientific approach to organising their supply systems? Who helped them recruit a group of Cambridge mathematics graduates that would build the first business computer?

It was a man called George Booth, the sole non-family member of the board and he was - the company secretary!
(images from wikipedia)

July 2016: Governance and Bureaucracy

This week I had a student call me and say “I have read and re-read the Main Principles in the Code and I am no wiser – what does it mean? What does it want me to do?”
We teased out the problem: Principle A.1 tells us that “Every company should be headed by an effective board which is collectively responsible for the long-term success of the company”. She asked what is meant by “effective”; when is the board not “collectively responsible” and how long is “long-term”? In short what is the board supposed to do, so that she can be satisfied the company has complied with Principle A.1?

If we follow the pathway blazed by Cadbury the answer is clear: the board should decide if it is effective, collectively responsible and what the long-term means. And the owners will decide if they agree with the board. Principle A.1 is deliberately vague: the business should organise itself in the way that works best for the business.
However, “vague and flexible” does not allow you to close the file and move on. But complying with the Provisions does allow you to close and move on: the Code Provisions have “edges”: the Provisions are the way to satisfy the Principles.

Organisations have problems with uncertainty, with topics being left vague. They have an inbuilt tendency to reduce the unknown to manageable limits. And perhaps you and I are witnessing that process in Corporate Governance. What began as a pamphlet produced by an ad hoc committee is now an organisation staffed with keen bright employees busy researching, defining and updating how to run a company. From a short one-off Code we have moved to annual governance progress reports, regular updating, illustrative guides on how to make decisions to what we mean by risk to the degree of information required in order to be considered transparent.

You and I are in the middle of this bureaucratization of governance. Despite the insistence that all is just guidance and nothing is
a tick-box, remember that obtaining economic, efficient information is what forms and ticking boxes is all about. This is the information required; do this to comply and you are “good to go”. After all you don’t apply for a passport by writing a letter about yourself.
When we started teaching governance there was little the student needed to learn; now the FRC guides are a textbook in themselves. My student’s worry is being answered: in practice just apply the latest Provisions and FRC guidance. That should give you an effective board.

But the last word goes to Robert Tricker: “Interestingly research has shown that the typical corporate governance indicators, such as board structure, the independence of directors and the use of board committees are not the best predictors of board effectiveness. Rather less specific indicators sometimes called soft governance such as the working relationships between directors, the standard of chairmanship or directors’ knowledge of the company were found to be more significant”.

May 2016: Thoughts on Corporate Governance

One of the features we tend to under-estimate in corporate governance is the degree to which the topic is dynamic, the extent to which it can change. Elements we thought fixed dissolve overnight; fundamental truths turn out to be simple presumptions.
When I studied company law at University, the Law Department was heavily involved in the branch of jurisprudence called “Critical Theory”. One of the main texts was Berle & Means analysis on the collapse of shareholder power and its replacement by the power of the directors. We even had the great economist J.K. Galbraith lecturing us on the power of corporation and the men (there were few women) who ran the companies of the “New Industrial State”.

When I went to Zambia, this idea of controlling the big organisations became the philosophy of “Zambian Humanism” and I was teaching this together with Nyerere’s Ujamaa and Nkrumah’s Consciencism. All involved the State correcting the governance of large corporations by taking controlling stakes. We were ending “neo-colonialism”.

Fast forward to this century: now it was free markets, privatization, globalisation and the business of Cadbury and SOX to guide or order us how to run organisations. The dominance of the executive directors or the government had given way and returned power to the shareholders, in particular the dominance of the institutional investor. Many of you will quote the phrase “If you cannot sell you must care” and will be learning your references to the Stewardship Code.

But governance is changing. Note the rise of private equity: removal from Stock Market – removal from the public arena. This is capitalism from the early days of Brunel and Rockefeller. It is not the same because the funding is from a different source. And that brings us to the Sovereign Wealth Fund: Norway’s pensioners should be glad of theirs: it is one of the wealthiest in the World. This is the State investing in companies: “ujamaa” but with a difference.

But recently the greatest surprise for me was on page 87 of
Robert Tricker’s third edition of Corporate Governance. Here is an excerpt:
“However an unintended consequence of changes to tax law and corporate regulation in the UK has been a shift from a longer-term owners market to a shorter-term traders market. In the past institutional investors owned up to 80% of the shares in the London Market. Pension funds and insurance companies owned up to 80% of the shares in the London Market. Pension Funds and insurance companies have been heavy sellers of equities to overseas investors, hedge funds and sovereign wealth funds. Now they account for less than 30% of UK share ownership. At this point their leverage over companies’ behaviour begins to wane.”

The institutions have sold and they have changed the market. The belief that long term development of the company is the aim of share ownership is now problematic. The fact that hedge funds have a different objective to the institutional investors changes the rules: to repeat Tricker we have gone from a long-term owners market to a shorter term traders market. What now of stewardship? Who will be the enlightened shareholder?

So what are the new realities of corporate governance? And just in case you missed it over the last two weeks: what has been happening with the Directors Remuneration Report voting. The Daily Telegraph is calling it a “Shareholder Spring against governance.” Who is leading this Spring?

As long as you are aware that it is still changing and probably accelerating you will be ready to deal with the twists and turns awaiting all of us mixed up with company administration.

Alan Campbell: Article archive

Jersey Evening Post - February 2006: What qualifications do you need? by Alan Campbell
Gibraltar Chronicle - October 2003: The UNIQUENESS of the Company Secretary by Alan Campbell
Gibraltar Chronicle - March 2003: CORPORATE GOVERNANCE: A brief introduction to a rapidly developing subject by Alan Campbell
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