Report - House of Commons Governance - House of Commons Governance Committee Contents


2  What is good governance?

7. All organisations need some form of governance, and there are many different models by which it may be provided. Corporate governance is defined by the Treasury as:

    the way in which organisations are directed, controlled and led. It defines relationships and the distribution of rights and responsibilities among those who work with and in the organisation, determines the rules and procedures through which the organisation's objectives are set, and provides the means of attaining those objectives and monitoring performance. Importantly, it defines where accountability lies throughout the organisation.[5]

8. Rt Hon John Thurso MP, Chair of the Finance and Services Committee, who ran hotels and companies at CEO level before he entered the House in 2001 and has also served as a non-executive director, stated in written evidence: 'The main points of good governance are common to all organisations'. They are: 'a clear understanding of roles and how checks and balances work' and 'external (or non-executive) balance'. He added: 'The division of responsibilities between executives and non-executives and the role and powers of the Chair are critical;' and stated: 'Structures should be based on first principles.'[6] Lord Browne of Madingley, who is currently the Government's 'Lead Non-Executive', told us:

    Governance must start with clarity, which is difficult to achieve, and with a clear understanding of accountability, which includes decision rights. Who gets to decide what and to whom do you report when you have done it?[7]

Sir David Higgins told us: 'clarity of accountability is essential in any sensible organisation.'[8]

9. Governance arrangements, then, must enable an organisation to meet its primary purposes: they must always be a means to an end, and not an end in themselves. They must deliver clear decision-making, with a high degree of transparency and clarity, whilst incorporating appropriate levels of oversight, challenge and effective personal accountability. They must be practicable and resilient under pressure, taking account of how people behave. They must also have the support and confidence of those who operate within them. Good governance distinguishes between strategic and operational decision-making, and has mechanisms in place to ensure that those decisions are then delivered and the objectives met. Central to all governance arrangements is a focus on the achievement of the main objectives of the organisation.

10. In principle, any reform of governance arrangements should be incremental rather than sudden or disruptive, so that organisational memory is not lost and what works well is retained.[9] On the other hand, as Dame Janet Gaymer, one of the external members of the Management Board, reminded us, 'it is very important to look at the governance structure as a whole'[10], and there is a danger in addressing a part of the arrangements without thinking through the consequences for the whole.

11. Furthermore, while some principles of good governance are universal, governance structures will differ according to the needs of the body in question. John Thurso commented in written evidence:

    it is…crucial to understand that there is not a complete read across between private and public sector, or between profit and not for profit organisations, and that the different focus of an organisation needs to be reflected in the governance structures. This is particularly true of the House of Commons.[11]

12. There is much to be learned from best practice elsewhere in the public and private sector, but we are aware of what Sir Kevin Tebbit told us:

    I would beware of simply trying to import management models from business and trying to install them here, because of the self-governing nature of the House.[12]

This point is crucial and has informed all our deliberations. The House of Commons is a unique institution, because it is the national legislature. This singular character of the House is compounded by the fact of the United Kingdom's 'unwritten constitution', which means that Parliament's sovereignty, including how it is run, is constrained only by its own legislation which it may reverse.

13. There is another characteristic of the House of Commons which makes parallels with other organisations hazardous: the Commons is run by its 650 Members, who have all been through the hard test of election and who are skilled at articulating concerns and making an argument. This places it in a different position not only from PLCs in the private sector, but from every other public institution. At the same time, no one within Parliament, including no one who gave evidence to us, suggests that Parliament should not be as efficient as possible, nor that it should not learn from the experiences of other institutions.

Structures

14. Rt Hon Lord Laming suggested :

    The important thing from my point of view is not so much the structure—I am sure that either can be made to work—but the role definition and accountability…you can do it either way, but you must ensure that the accountability is well and truly defined and that there is no ambiguity and no shifting the buck here, there and everywhere.[13]

Conventionally a clear governance structure would have at its apex a single governing body, containing both executive and non-executive roles, with a remit which defines what it is responsible for, and what it has delegated and to whom. This delegation of powers and responsibilities (essentially of 'decision rights') can be to formal sub-committees of that board, or to named individuals in executive positions. There is normally a single senior executive—a single head—who then delegates specific responsibilities further down the organisation. In identifying that role, an organisation should look to its 'real purpose'. Witnesses confirmed this in their evidence.[14]

15. Properly constructed boards encourage collective decision-making and provide a valuable series of checks and balances on the executive function. However, it is also important that they balance this oversight with delegating their decision rights to where they are most effectively held.

16. Whilst much of the focus of good governance practice in recent years has been on the development of boards, personal accountability remains a fundamental principle in public institutions. In turn, those who are accountable must have the ability to manage that for which they are accountable, and therefore a single line of command, at executive level, is critically important. Andrew McDonald told us: 'the basic notion underlying the accounting officer is that one has clarity about who ultimately is responsible for the proper discharge of public money.'[15] He also made clear that a perfect solution was seldom achievable:

    Elegance and precision in job design and organisational design is something that one should aim at, but it is rarely obtainable in practice. In absolute terms, one might be able to sort out 90% of the responsibilities going to one role or another.[16]

Mark Addison, the former Chief Executive of the Crown Prosecution Service, described in written evidence an alternative governance structure, which was introduced at the Crown Prosecution Service following a major review in 1998:

    A key recommendation was to create two separate roles at the head of the organisation (and to replicate this at local, operational level). One, the Director of Public Prosecutions, was to focus on casework and legal policy, and the other, the Chief Executive, was to focus on managing the organisation.[17]

Sir David Higgins told us about the close working relationship he had with Paul Deighton, then Chief Executive of the London Organising Committee of the Olympic and Paralympic Games:

    We said, "We have to make the relationship work; we have to trust each other and we can't let anyone divide the relationship. We will have an entirely open and honest relationship. It is not a case of who is on top of each other or who reports to whom." The reality was that neither of us reported to each other, but it was pretty clear that in the end we both had to work together and solve our own disputes.[18]

People

17. Effective governance relies on the quality of people, from the top to the bottom of the organisation: the right people with the right skills in the right places. This applies to board members and senior managers as much as anyone else. It is essential that the right skills and experience are represented in the senior governing bodies. The Cass Business School suggested that: 'boards which are diverse, experienced with the issues they are governing, and independent tend to provide oversight.'[19]

18. In creating an organisation of effective people a balance needs to be struck between developing internally and recruiting externally, providing staff with stability and career progression but also bringing from outside the skills and expertise that are needed to fill gaps. This must be supported by, and can also contribute to, a wider commitment to the encouragement and promotion of diversity.

Culture

19. Barbara Scott, one of the external members of the Management Board, told us: 'Culture, at the end of the day, is how we do things and how we behave, and it has to come from the leadership.'[20] The Public Administration Select Committee (PASC) in its written evidence told us:

    Any structural or organisational change should only be considered as a consequence of a full understanding of the underlying causes of difficulty or failure. If this is not done, structural change, with all the disruption which that involves, will become no more than distraction. This may be welcomed by those who want to avoid the more difficult, personal causes of problems in the organisation, which are likely to be in the culture. By culture, we mean what is embedded in the attitudes and behaviour of the people in the organisation, and PASC has found this is by far the most important determinant of organisational effectiveness.[21]

20. A culture which encourages and promotes constructive challenge, both within a management team and by bringing in external expertise and experience, is now generally accepted to be a critical element in effective decision-making. This culture then needs to permeate down through an organisation so that all its members understand the value of oversight and are ready to explain their actions, decisions and outcomes.

21. An effective organisation should embrace the diversity of the society of which it is part. Only by doing so can it draw on the full spectrum of strengths and skills available to it. In the case of a public sector organisation there is an additional imperative to reflect the diversity of those whom it is there to serve and from whom its resources are drawn.

22. Effective organisations have a clear focus on the delivery of objectives, outcomes and outputs, rather than inputs. This needs to be tied in with clarity of responsibility and accountability. Myfanwy Barrett, Director of Finance, explained: 'it is more about a culture in the organisation that follows up on a decision and accepts that that is a decision and it is going to happen.'[22]

23. Openness and transparency are common features of effective organisations, creating an atmosphere which encourages innovation and promotes the benefits of change. Staff need to feel empowered to take initiatives in areas for which they have delegated responsibility, confident that they will be supported by their managers. Responsibility and accountability should not tip over into blame and recrimination.


5   HM Treasury, Corporate governance in central government departments: Code of good practice 2011, July 2011 Back

6   John Thurso MP (GOV011) para 3 Back

7   Q1 [Lord Browne] Back

8   Q579 Back

9   For Sir Kevin Tebbit's approach to this issue see Qq794-96 Back

10   Q100 Back

11   John Thurso MP (GOV011) para 3 Back

12   Q805 [Sir Kevin Tebbit] Back

13   Q488 [Lord Laming]. See also Gavin Wright, Forbes Solicitors (GOV083), Leader and Shadow Leader of the House of Lords (GOV093) Back

14   Q16, Q356 Back

15   Q586 Back

16   Q582 Back

17   Mark Addison (GOV 047) Back

18   Q578 Back

19   Cass Business School (GOV071) para 8 Back

20   Q147 [Barbara Scott] Back

21   Public Administration Select Committee (GOV024) para 6 Back

22   Q184 Back


 
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© Parliamentary copyright 2014
Prepared 17 December 2014