The Post Office, yet again! Of professions, brakes and accelerators

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The public inquiry into the Post Office in Britain resumes this week after a break for Easter, so it’s time for an update.

This governance fiasco that should have gone away a decade ago, but it keeps on offering us reasons why we need to think about how enterprises conduct their business, and states regulate them. And, yes, this is a state-owned enterprise, which provides reasons to question the wisdom of having the state deeply involved in enterprise.

Here are the latest developments: On Wednesday, March 27, Channel 4 News broadcast recordings of conversations a decade ago between UK Post Office senior officials and the specialist forensic accountants they had hired to conduct an internal investigation into suspected widespread fraud by the people who ran Post Office local branches. The recordings showed that top Post Office officials knew that the cases were deeply flawed. A backdoor to the accounting software the Post Office required sub-postmasters to use permitted people outside the organisation – specifically from the software suppliers – were able to change the records in the system without the sub-postmasters knowing. They advised the company’s top legal staff to brief the chief executive immediately. The CEO was due to speak to a parliamentary committee the next day. The accountants were subsequently dismissed.

Then, on Thursday, March 28, the BBC reported that it had obtained a draft report from 2017 written by Deloitte, a major accounting and consulting firm, that the Post Office had subsequently hired. It also reported that the accounting software the Post Office had imposed on the sub-postmasters was faulty, in precisely the same way.

Despite these two forms of professional advice, the Post Office intensified its prosecution of the sub-postmasters, eventually spending £100 million in prosecuting hundreds of sub-postmasters, sending many to prison, bankrupting others, driving a few to suicide.

How does any company prevent executives from engaging in such disregard from professional advice? Taking professional advice is one the steps that company directors regularly use. Company directors in the UK are personally liable for the actions they undertake as directors. The ability to say that they have taken advice is a way of protecting themselves from prosecution when things go wrong.

Professionalism, as commonly defined, involves the possession specialist knowledge and adherence to an ethic of protecting and constantly improving that body of knowledge. It is a condition that accepts that knowledge is more important than person advantage. Professionals are thus conservative, slow to change, but open to do so when the evidence is compelling. This understanding has come under question, to be sure. Professions compete with each other in their claims to specialist knowledge (Abbott, 1988), and firms within a profession compete with each other, often letting that knowledge-service ethos slide and personal gain take over (Freidson, 1994). But when they work in ways that give clients uncomfortable messages, directors ignore them at their peril.

Professional advice can be a nuisance, of course. Lawyers and accountants are professionally cautious. In businesses, they are people who apply the brakes when the executives want to step on the accelerator (Nordberg, 2011, p. 7). But ignoring professional advice is tantamount to reckless driving. Let’s see what happens now to the recklessness of the Post Office.

The larger question, though, is what lessons we can draw for the rest of the governance complex. We can’t easily stop officials from ignoring advice, whether it’s not listening to the professionals or listening and then not acting. The new evidence in the Post Office case doesn’t prove definitively whether the advice got through to the board of directors, or even to the chief executive, though there is a strong indicative that it did. But it does suggest that those anywhere near the top of corporations need to be more thoughtful before they dismiss warning signs, especially when they confound what seems to be accepted “wisdom”. Thoughtfulness is an indicator that ethics might be coming into action (Nordberg, 2023). Who at the Post Office decided to stop thinking?

Abbott, A. (1988). The System of the Professions: An Essay on the Division of Expert Labor. Chicago: University of Chicago Press.

Freidson, E. (1994). Professionalism Reborn: Theory, Prophecy and Policy. Cambridge: Polity.

Nordberg, D. (2011). Corporate Governance: Principles and Issues. London: Sage.

Nordberg, D. (2023). 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.