A design for life

There is a great culture clash at the heart of corporate governance. One side is knee-deep in codes, formality and process. The other simply looks at what is happening in an organisation and applies a common-sense test of whether things are working well, or badly.

The problem arises when the two get caught up together. Process gets in the way of clarity of thought. The freedom of common sense finds itself at odds with a formal method of reaching the same result.

A good example of this is some of the work that has come out of the Financial Reporting Council (FRC) over the last few years. Its programme of publications and initiatives around the central idea of getting rid of clutter – from the verbiage in annual reports and other communications to shareholders and stakeholders to the overload of figures and extraneous information – has worked well.

However, companies tend to be organised through process-driven corporate governance. Various routes of communication take us from the stakeholders, shareholders and the audit committee to the board of directors; or from external auditor and the audit committee to the finance director; or from the board of directors down to the external auditor via the audit committee. Formal methodologies for communications between these groups can start to get in the way. The sheer complexity of the different routes says it all.

Amid all this, the elements of common sense you gain from a clear mind can come unstuck. Messages become diluted. The originality of an idea becomes dulled. A bright, thoughtful initiative runs out of steam. But the process-driven memos, reports and assessments continue undeterred. And they tend to win.

This is why initiatives to remove clutter are so important in this field. They have a by-product as well. Once clarity of thought can be seen as the benchmark, then other issues become clearer. Actions which would not have been seen as necessary suddenly spring to mind. The company becomes a better place. Eventually this is turned into shareholder value, and everyone goes home happier.

The drive behind the FRC’s continued efforts to remove clutter was one man who stuck at the task: Ian Wright, FRC director of corporate reporting. He retired at the end of March, but his influence lives on in the publication of the latest instalment in his de-cluttering programme – Cutting Clutter: Combating clutter in annual reports.