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Companies of all sorts suffered in the last financial meltdown. I say “last” to distinguish it from the next. Among companies that suffered most were those involved in finance – banks, mortgage providers, insurance brokers and other financial institutions. They all had boards of distinguished directors, many of them non-executive and eminent in their own spheres. Why did they not do a better job of directing the businesses?

Simon C Y Wong in the McKinsey Quarterly suggests that these boards were probably able to claim that they followed best practice, in which case best practice was not good enough. I agree; the question is ‘how can best practice be improved?’

Non-executive directors of a company face the same dilemma as the auditors – they are paid by the company. They have an inbuilt conflict of interests. In the case of directors pay is not necessarily only money. The prestige of being on big company boards and the contacts they provide with other senior people are a very real form of reward. Rather biblically one board position begets another which begets another and so on. In the end it can become a club bent on self-perpetuation.

The problems lie with companies of such a size that they significantly influence the markets in which they operate. Their shareholders will consist partly of major investment funds plus, probably, a large number of small shareholders who do not, and may not wish to, understand the business. Not every retiree should be obliged to spend his twilight years rummaging through wordy annual reports and attending inconveniently timed annual general meetings.

Both auditors and non-executive directors should be appointed and paid from outside the company to represent all the shareholders, not just the big ones. Their remuneration should be a genuine item at the AGM, not a ‘nod-through’. All directors should be paid a bonus. This should be based – at least mostly – on results seven years after the present year and not just on today’s profits.

A business is for the future not just for the present. The same is true of the human race. It is time to stop the Gadarene rush down the slope of instant gratification and try to act as though we cared about our children and grandchildren.

If we don’t, nobody else will.