9. The Bureaucratic Board: The Big Four

Boards can become prisoners of their own culture, for example bureaucratic boards where an overly controlled rules-based philosophy dominates, with inflexibility of thinking and an insistence that board processes are what counts. This is very dangerous as it leads to a lack of challenge and independent scrutiny by board members. The consequences have been repeated failures by the Big Four accounting firms to spot financial weaknesses during audits which have jeopardized businesses across the globe risking investor funds, pension plans and even the existence of firms themselves as was seen in the collapse of Arthur Andersen. They have failed to deal with conflicts of interest and too often put revenue generation ahead of sound audit for their customers. Controlling over 95 per cent of the audits of FTSE 350 companies, regulators are preparing plans to reform the sector and in the meantime the Big Four are receiving fines.