Network Rail governance under scrutiny
15 August 2008
On 8 August the Office of Rail Regulation published a report by consultants KPMG on 'certain aspects' of the governance of Network Rail and options for change. According to ORR the report, Network Rail: Membership aspects of governance, provides insights into how the role of Network Rail's Members 'might be strengthened' to make them more effective in holding the company to account for its performance.
KPMG's remit was to propose suggestions for strengthening Network Rail's governance structure within the company limited by guarantee framework. To narrow the scope the study focused on a comparison of the governance arrangements and approaches in similar non-equity-based organisations, plus specific issues related to Network Rail's membership structure. On the inter-organisation comparison, KPMG concluded that there was no 'one-size-fits-all' structure. This reflected the UK emphasis on principles rather than detailed solutions when organisational structures were created.
Interviews with Network Rail Members revealed a fundamental difference in views between themselves on the effectiveness of Network Rail's governance arrangements and membership structure. According to KPMG, Members with 'significant experience and interest' in the railway industry were 'in close agreement' that the current membership structure and approach are flawed. However the views of the remaining Members differed both from this view and from one another.
KPMG notes that the divergence of views 'seems to stem from a lack of consensus between Members about their role'. It adds 'this is not conducive to the exercise of effective governance and suggests that there is a case for further review and, potentially, some change to the current arrangements'.
Two particular issues emerged from the study. There is a 'lack of clarity' about the role of Members and the way they are selected. Members also lack access to the information and analysis needed to take an informed view of Network Rail's performance, including future prospects, and to hold the company to account efficiently.
Commenting on the report, ORR Chief Executive Bill Emery said that the findings would 'help us to decide whether we should make any changes to Network Rail's licence condition on corporate governance'. He also expects the report to make a 'useful contribution' to the review of governance by Network Rail's Members. Roger Ford
Copyright © 2008 Modern Railways Magazine