Reg­u­la­tions that are en­sur­ing firms are made to walk the walk

Time to end prac­tice of empty prom­ises

Yorkshire Post - Business - - CAPITAL MARKETS - TIM WARD CHIEF EX­EC­U­TIVE, The Quoted Com­pa­nies Al­liance

THERE’S THAT won­der­ful man­age­ment motto of “walk­ing the talk” where lead­ers are en­cour­aged to demon­strate that they can turn their in­ten­tions into ac­tions.

Get out there and show them that you can do it too. You hear about man­agers driv­ing vans, work­ing on the fac­tory floor and the like. I would think many em­ploy­ees greet such ac­tions with cyn­i­cism, think­ing that this is mere play act­ing. But how do we hold lead­ers and com­pa­nies to ac­count to en­sure that they do what they say?

Well there is a good ex­am­ple of where reg­u­la­tions help pro­vide clar­ity on com­pa­nies’ pro­pos­als. The Takeover Panel has a rule that is con­cerned with the state­ments made by of­fer­ors in their takeover doc­u­ments. This rule re­sulted from the pub­lic­ity from a state­ment made by Pfizer in 2014 re­gard­ing some long-term com­mit­ments it would make if it took over As­traZeneca.

The rule is de­signed to pro­vide more clar­ity on state­ments made by par­ties to an of­fer so that any in­for­ma­tion dis­tin­guishes be­tween: (a) a ‘post-of­fer un­der­tak­ing’, re­lat­ing to any par­tic­u­lar course of ac­tion that the party com­mits to take af­ter an of­fer fin­ishes; and (b) a ‘post-of­fer in­ten­tion state­ment’, re­lat­ing to any par­tic­u­lar course of ac­tion that the party in­tends to take af­ter the end of an of­fer pe­riod.

It is a rare ex­am­ple of a rule or reg­u­la­tion that calls for a com­pany to de­cide how their com­mu­ni­ca­tion must be in­ter­preted. It is done, in the case of an un­der­tak­ing, in the knowl­edge that the com­pany’s sub­se­quent ac­tions will be over­seen by an in­de­pen­dent asses­sor to en­sure that the rel­e­vant un­der­tak­ing is faith­fully car­ried out.

There are many other sit­u­a­tions where it would be good to know how cer­tain a com­pany is about what they in­tend to do. Are they say­ing they will do some­thing in any event, or are they say­ing that they might do some­thing if cir­cum­stances per­mit?

There are other non-cor­po­rate sit­u­a­tions where this ap­proach could cre­ate a bet­ter in­formed so­ci­ety, so that com­mu­ni­ties could, in turn make bet­ter in­formed judge­ments. For in­stance, po­lit­i­cal par­ties could set out their pro­posed poli­cies in their man­i­festos in a clearer way if they knew that un­der­tak­ings would be in­de­pen­dently as­sessed. Per­son­ally I think it would be a great step for­ward if we knew which pol­icy state­ment was an un­der­tak­ing and which ones were state­ments of in­tent.

This would al­low the elec­torate to be bet­ter able to judge the ac­tions of any gov­ern­ment. Per­haps man­i­festos would be­come more re­al­is­tic and would con­sider how much could be im­ple­mented in the life of a sin­gle par­lia­ment.

I’m sure you can think of good ex­am­ples where what seems to be a clear state­ment has un­rav­elled quickly. As an ob­vi­ous ex­am­ple it might have turned the Brexit de­bate into some­thing more pro­found and mean­ing­ful if the par­tic­i­pants had been re­quired to dif­fer­en­ti­ate be­tween what they in­tended to do and what they were ac­tu­ally un­der­tak­ing to do; in the knowl­edge they would be held to ac­count. Messages on bat­tle buses would have been very dif­fer­ent.

In the light of the start of the new foot­ball sea­son it would be great if ‘votes of con­fi­dence’ by boards of foot­ball clubs were dis­tin­guished be­tween state­ments of un­der­tak­ing and state­ments of in­tent. Cur­rently, the world sees all such votes as be­ing a state­ment of in­tent that last for about three games be­fore cir­cum­stances are such the manager in­evitably gets fired. A state­ment of un­der­tak­ing by foot­ball club boards would be a very rare thing but at least words would have more mean­ing.

We might find our­selves in a more trans­par­ent world where state­ments were sup­ported with fact rather than fake news and empty prom­ises. Some­times we can learn from the way com­pa­nies are reg­u­lated to find a bet­ter way of do­ing things in other parts of our world.

Per­haps man­i­festos would be­come more re­al­is­tic. Tim Ward, chief ex­ec­u­tive of The Quoted Com­pa­nies Al­liance

PIC­TURE: STE­FAN ROUSSEAU/PA

PROTESTS: Po­lit­i­cal par­ties would set out their pro­posed poli­cies in man­i­festos in a clearer way if they knew that un­der­tak­ings would be in­de­pen­dently as­sessed.

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