What specific issues does Partygate raise for Corporate Governance?
Whilst Partygate didn’t see any high-profile court-cases or major prosecutions besides a few fines, it did inflict severe damage on the reputation of government and the Conservative party and has focused public attention on stories of corporate sleaze, poor governance and failings in the integrity of leaders ever since. Thanks to Partygate, the attention of the public is likely to be fixed firmly on standards and governance in public life for a long-while yet, even if the UK Government itself isn’t beholden to the rules of corporate governance legislation.
The scandal however has served as a valuable reminder about the danger of failing to comply with best practice corporate governance, both in terms of the law and also wider reputational damage.
Specifically, Partygate has focused our minds on a number of issues with direct relevance to Corporate Governance:
1. Integrity in leadership
As point 1. B of the UK Corporate Governance Code puts it, ‘All directors must act with integrity, lead by example and promote the desired culture.’
In the case of Partygate, it’s clear that if the leadership of the Government was the leadership of a corporate organisation, it would have failed to live up to the spirit of the Code and would probably be facing penalties.
Integrity means honesty: saying you’ll act in a particular way and doing it. It means holding strong principles that inform those actions. If Partygate has shown us anything, it’s that with principles and values comprising a key part of corporate governance, it’s clear that any breach in them risks putting your organisation at the mercy of the law and public opinion.
The sheer number and scale of illegal gatherings held by the Government and Conservative Party means that knowledge of the events must have been a widely-known - and widely kept - secret by most employees at the company.
The fact that only a few whistleblowers ultimately blew the lid on the affair points to how difficult it is for ordinary employees to go public with allegations of wrong-doing or law breaking at an organisation, for fear of losing their job, facing victimisation or being attacked in public.
Boards need to make sure that whistleblowers are adequately protected in organisations and that employees are encouraged to come forward if lawbreaking at work is happening.
3. Problematic company cultures
Partygate points towards the importance of company culture in determining how well corporate governance at an organisation lives up to its expectations.
If company culture at a company is non-existent or tolerates rule-breaking, inconsistency in the way that rules are applied or dishonesty, it will seep its way into most aspects of the way that an organisation operates. This will naturally cause problems when it comes to living up the standards of corporate governance codes.