Monday, 18 July 2011

Sir Paul Stephenson resigns as Metropolitan Police Commissioner

What does this have to do with corporate governance? My answer is that it has plenty of lessons for us.

Newspapers have reported that Sir Paul Stephenson employed Neil Wallis, formerly deputy editor the News of the World, as a PR consultant. Unfortunately this man has subsequently been arrested in connection with the News of the World phone hacking scandal. The implication is that there was an improper relationship that could have affected judgements in relation to the investigation or that it was a reward for past favours. Just an hour ago I wrote, "It seems unlikely that either of these is true. After all, the most skilled advisers on dealing with the press are likely to be former senior members of the press." However, I have since read the New York Times article that says that Wallis was hired specifically to advise on phone hacking matters. If that is true then it changes everything and provides evidence for an improper relationship between police and the press.

A second report revealed that Sir Paul had stayed free of charge at an expensive 'health farm' following surgery last year and that this same Wallis was PR adviser to that business. However, it is also said that Stephenson was a personal friend of the owner. The Wallis connection is therefore a red herring. The more significant question is whether a senior police officer should be accepting large gifts from anyone, even a close friend? I think the answer is a clear negative and I was surprised to read that there is a register for police officers to report such gifts - gifts that should not be accepted in the first place.

It must be good practice for directors and senior executives also to report gifts and for their companies to publish a clear policy on what is acceptable and what is not. This is particularly important since the UK's Bribery Act came into force this month. Gifts, including hospitality, are generally given to business acquaintances in order to influence their decisions: why else would they be given? Since an invitation to a night out at the opera and dinner - or to a major sporting occasion - is likely to cost more than £1,000 the sums involved are not trivial. It is a difficult argument but I can accept that some level of hospitality oils the cogs of business without creating an improper influence. The recipient of 'low level' hospitality still feels able to cancel a contract or negotiate hard for lower prices. But it is wise practice for companies to maintain a register of all hospitality and gifts received and given.

But it can never be appropriate for a police commissioner who earns £276,000 per annum to accept a favour worth some £12,000 from anyone, even a close friend. On the one hand he could afford to pay for himself whilst on the other hand it is significant favour.

It is important to remember that we are not the judge in our own case; and for Sir Paul to claim his integrity is untarnished is mistaken because that judgement is for others to make.

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