Are British businesses micromanaged?

Are British businesses micromanaged? That’s the recent mood in London regarding the UK’s latest corporate governance and ESG requirements. 

This issue lies at the intersection of the need for more oversight and the pressure on companies to comply with it. Inevitably, these situations foster debate over how much boards and executives should be required to do. 

The issue is particularly pronounced in the UK, a country in the middle of an economic identity crisis.

A report in the British newspaper The Guardian this week claimed that big firms registered in London will have much to say about the UK government’s new regulations on sustainability reporting. 

Kier Starmer’s victorious Labour Party had pledged more oversight of FTSE 100 companies so that they would adopt “credible” climate action plans, which would align with the country’s commitments to the Paris Agreement. 

However, the article suggested that this would be at odds with the mood in the City of London, where corporate leaders are wary of new rules. One expert was quoted as saying meaningful growth was impossible if the government tried to “micromanage business through regulators, second-guessing decisions that rightly belong to company boards.”

The broadest angle possible is that this is an issue of balance between regulators and companies regarding core decision-making. It is one of the oldest issues in modern business, and it has resurfaced in different forms over the decades, shaped each time by stakeholder wishes and current events. 

This balance is a particularly hot topic in the UK right now. Following Brexit, the country is still in the early stages of becoming a standalone economy, and its waning influence on the world economic stage means many are eager to promote the country as an attractive place to do business, free of red tape and perceived micromanagement that new rules can often hint at. 

But that won’t do much to stem the globalised interest in sustainability, better governance, and more rules on the books to support those initiatives. So, what does the UK do, sacrifice regulations and accountability to attract more business, or go hard on rules and risk the “micromanagement” reputation getting worse?

It does seem that way. Priorities around how strict the rules should be have shifted over the years, even during the previous Conservative government’s lifetime. Now, under Labour, there is still a lot of noise about how to get the balance right. 

Ultimately, there just doesn’t seem to be an easy solution to how much oversight the British market can tolerate while trying to regain lost popularity.

There’s not so much a way around it as there are ways to roll with it. Compliance is inevitable, even if its intensity is still up for debate. So, good corporate leaders will start there and focus on two opportunities at their disposal.

Feeding back to lawmakers can have varying degrees of success, but the option is always there for directors and executives. It’s a crucial chance to disclose how new rules work in practice or explain the knock-on effects hurting the business. 

This is a long process, and it’s likely to lead to debate in the first instance rather than a material change, but it can often spark the right conversations with the people who matter.

Good directors will know that while the debate is temporary, regulators’ expectations will still shift over time. In this scenario, the advantage will come to those companies that invest in the right expertise now. 

Think sustainably: what skills will you need to comply with lawmakers’ requirements? If you don’t have them, can you find them in the current talent pool? Can you train your current board or executives if that’s not a runner? 

Such actions could turn “micromanaging” into “manageable”, especially when you begin to incorporate new compliance requirements into company strategy.

Are British businesses micromanaged? – The Corporate Governance Institute