Governing the governors [not like that]

Post Office Ltd., CC BY 1.0, via Wikimedia

Anyone within earshot of (or an internet connection to) the UK has been feasting on the discomfort of the government about its poor governance of the Post Office. The postal service – a disservice, many now think – consists of the postal distribution hubs and the post offices at the end of the spokes all over the country. A couple of decades ago, its headquarters imposed an accounting software package on the “sub-postmasters” in the pursuit of better business practices. It didn’t work out so well.

The software – or someone, something able to access it – managed to make money dutifully collected disappear. The Post Office prosecuted the sub-masters. Many faced criminal convictions. Other lost their livelihoods and even homes. Some committed suicide. Nobody, in headquarters, government or elsewhere listened. A comment article in the Financial Times sums it up well:

“One of the reasons the Post Office saga took so long is that it was a state-owned entity which was also independent. It wasn’t accountable to anyone,” Camilla Cavendish, FT.com, 13 January 2024

A small trade magazine, Computer Weekly broke the story in 2009, but still few paid attention. Some other journalists started talking about it, though. I can recall feeling astonished about how such a situation could arise about 2010, when a change in government provided the opportunity to wipe the slate clean. It didn’t happen. Ministers were too busy, maybe, sorting out the aftermath of the Global Financial Crisis.

In January 2024, after recurrent news stories, and after a handful of sub-postmasters finally won court rulings that they were not to blame, the television channel ITV broadcast a long-format series, a dramatisation of the events: “Mr. Bates vs. the Post Office.” With an election due sometime this year, the proverbial hit the fan. This quasi-fiction finally let the truth sink in.

The Post Office seems to have lacked anything like the standard of governance widely demanded in the corporate world. To be sure, it has a board of directors, with an independent chair, independent non-executive directors, and just the CEO and Finance Director as executive directors. Now, finally, an independent inquiry will look into the old saying in the corporate governance world: Where was the board?  

But the point Camilla Cavendish – an FT columnist and former official in the Prime Minister’s office – makes is this: The Post Office is owned by the state, yet the state has no structure to play the role of shareholders. We know who appoints the board. But to whom does the board report? In practice and not just in process.

Something similar is taking place in local authorities across the country. Many set up subsidiaries, as companies in law, to try to bring private sector efficiency into public service delivery. Many of those local governments now face extreme financial pressure at least in part because those actions of “corporatisation” have failed. A PhD student of mine is just finishing work on a thesis about it.

The hierarchical system of governance – management to directors, directors to shareholders – is far from a perfect system of accountability. Indeed, as I have written elsewhere (Nordberg, 2023a) accountability is as a vague term as it is important. Nonetheless the literature on governance – public and private – has received some good ideas from people of the philosophical inclination (O'Neill, 2002a, 2002b; Roberts, 1991, 2001), involving lateral as well as hierarchical accountability. They all depend, however, on appointing people who then act in a thoughtful, ethical frame of mind, less interested in rule and regulations. The must be willing to question, open to ideas, connected to the others that the organisation serves. I’ve written recently on that too (Nordberg, 2023b), a piece that sits behind a paywall, I’m afraid.

With state-owned entities the problem of accountability is even more complex (Nordberg, 2013, 2014), and more worrying, as we are now coming to learn. (Or perhaps fail to learn, again.)

Nordberg, D. (2013). Governance of the Governing: Accountability and Motivation at the Top of Public Organizations. SSRN working paper. Retrieved from http://dx.doi.org/10.2139/ssrn.2321093

Nordberg, D. (2014). Viewpoint – Governing the governance of the governors: Motivating accountability at the top of public organizations. Evidence-based HRM: a Global Forum for Empirical Scholarship, 2(1), 114-119. doi:10.1108/EBHRM-08-2013-0026

Nordberg, D. (2023a, April). Filling empty vessels: Accountability and responsibility in management and corporate governance. SSRN eLibrary. Retrieved from https://ssrn.com/abstract=4426644

Nordberg, D. (2023b). A pragmatist case for thoughtfulness and experimentation in corporate governance. In T. Talaulicar (Ed.), Research Handbook on Corporate Governance and Ethics (pp. 310-327). Cheltenham, Glos.: Edward Elgar. https://doi.org/10.4337/9781800880603.00030

O'Neill, O. (2002a). Lecture 3: Called to Account. Reith Lectures, BBC. Retrieved from http://www.bbc.co.uk/radio4/reith2002/lecture3.shtml

O'Neill, O. (2002b). A Question of Trust: The BBC Reith Lectures 2002. Cambridge: Cambridge University Press.

Roberts, J. (1991). The possibilities of accountability. Accounting, Organizations and Society, 16(4), 355-368. doi:10.1016/0361-3682(91)90027-C

Roberts, J. (2001). Trust and Control in Anglo-American Systems of Corporate Governance: The Individualizing and Socializing Effects of Processes of Accountability. Human Relations, 54(12), 1547-1572. doi:https://doi.org/10.1177/00187267015412001