“If legal, legislative, regulatory measures are needed, we will embrace them and implement them. A scandal like Wirecard is a wake-up call that we need more monitoring and oversight than we have today,” says German Finance Minister Olaf Scholz, who described the collapse of Wirecard this week (leaving debts possibly as great as $4 billion) as a “scandal”, acknowledging it was time to review regulation. “The Wirecard case damages corporate Germany. It should be a wake-up call for reforms,” said Volker Potthoff, chairman of corporate governance think-tank ArMID. The same sentiment was expressed by the charity commission this week following the significant governance failings of the RNIB which has shown ‘dysfunction in leadership and governance over many years’.
The FE sector is not immune to corporate failings, with regulators seeking to find answers to the lessons to be learned and implement strategies to prevent repeats of such events. These events are reputationally damaging to the sector and negatively impact on the lives of the young people to whom it is so dedicated.
A continuous stream of intervention, codes, and regulation, seems to do little to mitigate failings, and compliance with such appears to be a poor predictor of board effectiveness or indeed, institutional performance. It is all too easy in times of upheaval and change such as significant underfunding, the Area Review process, and the Covid-19 crisis, to become hung up on board structure and composition. Instead, the focus should be on content and boardroom dynamics. Meetings should be forward-focused on strategy, performance monitoring, triangulation of information, and accountability. Governors should be actively engaged, suitably prepared, independent thinkers, and competent team players, acting in the long-term best interests of the institution. Together, these provide comprehensive mitigation of possible leadership and governance failings.
It is in times of crisis that what the board does and how governors and senior leaders behave, becomes of crucial importance. The board has a key role in agreeing and having oversight of vision, strategy, values, and culture which ultimately guide institutional behaviour. The effectiveness of the board in this role is as likely to contribute to the prevention of corporate governance failings, as any regulatory control or compliance requirements.