The Horizon Scandal and Non-Executives responsibilities

It would be remiss of me not to comment on the Horizon scandal and its governance implications. The possibility of injustice always touches one’s conscience, particularly when it involves individuals’ livelihoods, freedoms, and a decades-long fight for recognition, explaining the public outcry. The recent Windrush scandal provoked a similar reaction, with its deportations from the UK as a result of a lack of historic paperwork and the government of the time’s ‘hostile environment’ to migration.

The Criminal Cases Review Commission has said the situation arising at the Post Office is “the most widespread miscarriage of justice the CCRC has ever seen, and represents the biggest single series of wrongful convictions in British legal history.”

Watching the dramatisation of what has taken place – ITV’s Mr Bates v The Post Office – and encountering the constant stream of news reports leaves one with a feeling of disbelief. It also invites us to question the system: if the governance practices of a household-name institution can fail so readily, what does that mean for the effectiveness of governance more generally?

Every sector has something to learn from what has happened. It should be a salutary lesson for all boards which, as the highest decision-making authority in any organisation, is required to have oversight of all aspects of its organisation’s work.

If I take an example from the Housing Sector and the recent report as a result of the Grenfell disaster where we know there had been many ignored complaints.  Mr Bates and his co-complainants raised issues with the Post Office on numerous occasions.  In light of the new rules on dealing with complaints under The Social Housing (Regulation) Act 2023 and the Complaints Handling Code, we all sectors like Housing need to re-appraise their approach. The response to queries around Horizon provides a template for how not to do it. Let me explain.

I often remind board members of the six key roles played by a board: being strategic, scrutinising the executive, being effective ambassadors for the organisation, setting and monitoring risk appetite, monitoring its collective performance, and reviewing executive pay. As I reflect on what we have learnt about the situation arising at the Post, my thoughts are as follows:-

• Strategy – In a recent case on the matter, the court heard that the Post Office board was aware in 1999-2000 of “a number of technical issues which delayed acceptance and rolling out of the [Horizon] system”, suggesting that “problems were therefore known from the outset”. Nevertheless, the board appears to have accepted Horizon’s infallibility when it came to prosecuting claims because it was committed to the strategic priority of implementing the system and, we can surmise, was therefore wilfully blind to the alternatives.  Strategic priorities are critical to a company moving forward, but it is incumbent on boards to review their strategic choices in light of all the information available to them from time to time – strategy must be agile, not set in stone, and not used to the disadvantage (even destruction) of stakeholders.
• Pay – The Guardian (and other outlets) report that senior investigators were given bonuses based on successful prosecution of sub-postmasters and the subsequent clawback of cash. The acceptance of such a position by the board (even if at one remove) surely indicates an ethical lacuna – tacit agreement that cash is king rather than trying to do the right thing.
• Ambassadors – Once the Post Office had established its stance, it refused to admit publicly to any concerns around the Horizon system, claiming it was robust. Subsequent legal disclosures of minutes of internal meetings revealed acknowledgement that this was not the case. Critically, it failed to disclose those doubts to the defence to its prosecutions. This goes directly to organisational culture; as the court summarised it, “…the important point for present purposes is that a [Post Office] employee acting as Disclosure Officer felt it appropriate to treat a document [relating to Horizon] as sensitive, and withhold it from disclosure, because it could be used to assist the defence. Such an approach to disclosure is plainly wrong, but it does not appear that any action was taken by anyone on behalf of POL to correct the officer’s serious error.”
• Risk – Serious questions are now being asked of the Post Office board and its CEO (at the time), not only about the culture overseen but its overall approach to risk. The long-term damage to the reputation of the institution and the financial repercussions of the failure to progress internal investigations into the software’s fitness for purpose, the sidelining of independent reports, and the errors (deliberate or otherwise) in dealing with the sub-postmasters’ defence, suggest a board that did not have the procedures or processes in place to test its controls (or deliberately chose not to).  What might this indicate about other processes at the relevant time?
• Scrutiny – Is it possible for the board to claim it carried out its key role of scrutinising the executive with due skill, care and diligence given everything that has since emerged?  If not, this is a fundamental failing of its governance role.
• Evaluation – The senior leadership seemed to feel that they, as a collective, had performed well. Bonuses were accepted.  The CEO was given a CBE (recently returned).  Again, given what has now emerged, as we can only ask whether board members failed in their duties or turned a blind eye?  Neither answer is satisfactory.

It is likely that the Horizon debacle will in future become synonymous with poor governance and how not to perform as a board.  Time will tell what other information emerges. For our own practices and organisations, let’s use this as a learning moment – to listen to our customers, take seriously and investigate fully their complaints.