Prof. Charlotte Villiers

Why Compassion is Relevant in Debates about Board Composition and Process 

Company boardrooms are currently facing strong criticism in the UK. In 2016 the Financial  Reporting Council launched a project aimed at improving board culture, observing that strong governance requires a strong culture of openness and accountability in the boardroom.  The Business, Energy and Industrial Strategy Committee held an inquiry on corporate governance which focused on directors’ duties, executive pay and boardroom diversity. The government under Prime Minister Theresa May published a Green Paper on Corporate Governance Reform which also asked questions about executive pay and what measures could be taken to increase the connection between boards of directors and other groups such as employees and small suppliers.  It is clear that trust and confidence in boardrooms and in big business has declined and that steps must be taken to improve what goes on in boardrooms if faith in our corporate governance is to be restored. In this paper I explore these issues from a perspective of organisational compassion. I argue that a compassionate approach to corporate governance starts in the boardroom and should influence the composition of the boardroom, drawing on an ethic of care, and that compassion could be a frame of reference for determining the processes and behavioural practices in fulfilling directors’ duties.

I argue that the prevalence of hierarchical corporate structures and a corporate governance system that gives precedence to shareholder wealth does not provide a context favourable to socially responsible corporate behaviour. The pursuit of profit maximisation does little to encourage good corporate actions. A compassionate approach would require radical reform of these structures and would lead to different boardroom objectives.