You often find that the use of a bit of business jargon tells you more about
the culture of a business than the exact meaning of the specific jargon itself.
Take that wonderful, and over-used, word, boilerplate. Whenever two or three
people are gathered together to discuss corporate governance issues the air
becomes full of mentions of boilerplates.
At launches of new initiatives in corporate governance, money has been known
to change hands at the back of the room after bets were placed on just how many
mentions the word would get in the opening presentations.
It is a word which expresses its meaning well. It sounds wonderfully clunky
and it somehow conjures up an industrial revolution scene from the days when
ponderous engineering was sold at enormous profit to the Empire. I recall
auditing just such an engineering works, many years ago. Great skills were
involved. But, even then, the speed at which you could do such things, and the
costs involved, had really destroyed those types of businesses within the UK
Oddly enough, if you do some research, you will find that the first recorded
mention of the word in the Oxford English Dictionary, comes from a detective
story – what the aficionados call a “police procedural”, based in New York and
written in 1965. In Doll, Ed McBain wrote that: “The rest of the will was
boilerplate”. And we know what he means.
It is the same sort of boilerplate that lawyers print out in reams – and for
large fees – in the early hours of the morning amid a chaotic scene of wasted
pizza boxes, when a deal is about to be signed. It is meaningless stuff, but it
has to be there. And it’s easy money.
This is the style of the boilerplate, which is usually used as an argument
against the concept of corporate governance codes. It is argued that corporate
governance has always been a form of compliance, which encourages documentation
rather than thought. It is seen as being indigestible and meaningless verbiage,
which pads out a report and accounts document to the point where directors
despair at the printing and design costs and interested investors fail to bother
That is why we should all beware the use of the word.
It is a sign that someone has not really seen the value in what you might
term enlightened disclosure. The principle of enlightened disclosure is that it
makes everybody happy. It makes analysts, investors and, particularly,
institutional investors very happy. They understand the risks to their
investments far better. They are able to come up with many more comparisons of
one company with another. They are able, with the greater amount of information
available, to create more effective models of the company’s performance.
This is very important. The more analysts can create what they think are
larger and more useful models of performance the happier they are. It may be
right, or it may be wrong. But analysts like lots of information to work on. If
nothing else, they feel that it impresses clients. And the principle of
enlightened disclosure also makes companies and their directors happy. They can
encourage any amount of feel-good factors by producing what the market sees as
useful information. They can even argue their way out of difficult times with
it. With more information in the public realm they have more ammunition with
which to work. They may sail a bit close to the old idea of lies, damned lies
and statistics at times, but it will be better than being accused of keeping the
information to themselves.
But the culture of the business world still operates against the idea of a
principle of enlightened disclosure. The recent publication of information on
the behavioural patterns of corporate governance among a large tranche of
companies from Pensions Investment Research Consultants, is a case in point. It
showed a wide variety of behaviours. But its publication was greeted by a
response of seeking out the number of companies, around a quarter, which didn’t
comply with all of the Combined Code on corporate governance.
This is the boilerplate approach, which still lingers in peoples’ minds. What
the Combined Code guidance urged was that it was guidance. If some point didn’t
fit the circumstances and there was a good and valid reason for this, then you
didn’t need to comply. But you did have to explain it clearly so that investors
and users of the accounts would understand why that particular stance had been
taken. This great principle of comply or explain has increasingly been taken up
enthusiastically by countries around the world, eager to apply the imprimatur of
acceptable corporate governance to their own markets.
This world of enlightened disclosure needs an open environment in which it
can flourish. And we will know when we have arrived there. We will be able to
sit through presentations about the state of corporate governance without ever
hearing even one mention of the word boilerplate.
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