Simon Osborne knows what it’s like to be caught in the eye of the storm: he was company secretary at Railtrack, the group that owned all the British railway stations, tracks and signalling until the business went so spectacularly bust in 2002.
As head of the legal team at the British Railways Board for 20 years, Osborne moved across after privatisation in 1994 to work as group secretary, and then legal director, at Railtrack in its new incarnation. It all started so well, with Railtrack joining the FTSE 100 index after it was listed on the London Stock Exchange to great acclaim.
Yet only a few years later, Railtrack’s future was being questioned after fatal accidents – at Southall in 1997, Ladbroke Grove in 1999 and then Hatfield in 2000. Inevitably, the accidents raised serious doubts over what impact the fragmentation of the railway network had had on both safety and maintenance procedures. Then came financial problems after Railtrack launched a disastrous bond issue, causing its shares to collapse to below the flotation price. The rest, as they say, is history and Railtrack’s operations were transferred to what we know as today’s state-controlled Network Rail.
Osborne was the one who “turned out the lights” on 31 March 2003. It was a disastrous day for everyone, he says, and one that he blames on the fundamental flaw that Railtrack was a loss-making concern, which needed massive subsidies just to maintain the network, let alone improve it. “Railtrack was a disaggregation that went too far: there were more than 100 different entities to the company. How can you run a business like that?” he says. “You know that saying, a man’s best friend is his dogma? Well, there were too many vested interests that got in the way, mainly those in the construction industry.”
Osborne learned much from the experience, mainly never to be afraid to speak the truth to power, and never to back down when confronted by bullies. “With regard to the former, it is important to emphasise that one is dealing with people; and that those with bigger egos need therefore to be handled with care. “As the proverb goes, it is the mild answer that turns away rage. Company secretaries are good at that; mildness is a quality that requires underlying steeliness.”
After Railtrack’s collapse, Osborne went on to work at the Institute of Chartered Secretaries and Administrators, advising on board evaluation work. He spent eight years reviewing and evaluating what makes boards tick the best, and how they should be improved: “It was about shining a bit of sunlight on how they operate.”
When the job of chief executive of the ICSA – also known as the Institute of Governance – came up in 2011, Osborne was a natural to slide into the hot seat. Although based at the Farringdon HQ in London, he has responsibilities reaching into 63 countries around the world, as the ICSA network stretches throughout the Commonwealth including to Australia, New Zealand, Hong Kong, Malaysia, Singapore, Ghana and Canada.
Soon to be renamed as The Chartered Governance Institute, the network is a curious mix of a qualifying and standards body-cum-trade association with more than 30,000 registered chartered secretaries. Most are either trained lawyers or accountants or governance experts and are accredited to the ICSA, which has recently signed up with two universities to run validated Masters courses. Nearly half of its members work for the private sector but others are employed in the NHS and other public sectors as well as charities.
“We are the only unregulated profession left and we have – so far – avoided any of the big disciplinary scandals that have afflicted most other professions,” says Osborne.
It’s a labour of love, but a role of great influence. You are at the board level, but not on the board. You don’t have to play all the silly games that get played but you have a position of power
Indeed, they are such a rare breed that there is a shortage of talent, one of the side effects of the growth in governance, and it’s still a relatively unknown industry. It’s not the sort of job that an 18-year-old is going to hear about from their careers adviser at school, says Osborne, laughing. “But then people in their twenties have ‘a lightbulb moment’ when they find out how fascinating the role of a chartered secretary can be.”
And that is? “Well, to start with it’s a labour of love, but a role of great influence. You are at the board level, but not on the board. You don’t have to play all the silly games that get played but you have a position of power. You need soft skills too.” Which is why there are so many women company secretaries at some of the UK’s biggest corporates. But that does not mean men aren’t good at soft skills too, he adds, a little hastily.
Osborne reckons boards have improved their behaviour enormously over the last few years. “There is less arrogance. Of course there are directors with a bit of swank. But overall most directors and non-executive directors are pretty good and many are keen for ongoing training. That is something we hear a lot.”
How does he view some of the more controversial recent corporate disasters, like the collapse of Carillion? He is careful not to pin blame, saying only that the insolvency report into Carillion is going to be an interesting read, and that the board will have difficult questions to answer.
What more can be done to improve board performance, and more independent thinking by NEDs? “There is a danger that NEDS take on too many jobs. They should be paid properly, giving them more time to concentrate on their roles so they can do the job well.”
More pertinently, he says that chairmen – and chairwomen – of remuneration committees (RemCos) should be much better trained as pay packages are so complex. “I still don’t understand what Professor Ann Dowling – a brilliant woman and president of the Royal Academy of Engineering – was doing as RemCo chair of BP when Bob Dudley was paid that extraordinary salary. Why was she made chair? My cynical take on life is to ask whether she was set up for that role. Wrong person in the wrong place at the wrong time.”
Osborne would also like to see reforms made to Section 172 of the Companies Act to broaden out what is defined as the “success” of a company to include wider measures that cover reputation, employees, the environment and other external factors. This would be a timely reform, he says and one which the ICSA is working with other bodies to promote in government. Slashing “board packs” down to a more manageable size would also be helpful.
Even so, Osborne reckons the UK is a world leader in corporate governance along with countries such as South Africa – where the governance reforms introduced by former Supreme Court judge, Mervyn King, have done so much to improve corporate life – and Australia. All jurisdictions, he notes, that share a common law tradition rather than those that practise civil law. “There is no such thing as best practice but I believe that the models favoured in Australia, South Africa and the UK are strong examples of good practice.”