Horizon scandal fallout hurts trust in governance

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As repercussions from the Post Office scandal continue, the Institute of Directors looks at how trust in both governance and business leadership was undermined.

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Horizon scandal fallout hurts trust in governance
by Matthew Ord
As repercussions from the Post Office scandal continue, the Institute of Directors looks at how trust in both governance and business leadership was undermined.

23rd Oct 2024
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There are lessons to be learned in boardrooms in the wake of the Post Office scandal, according to the Institute of Directors (IoD), and there needs to be a new – and long overdue – approach to directorship.

Also known as the Horizon IT scandal, the series of events saw subpostmasters being wrongly held responsible for losses in their branch accounts that they couldn’t explain, with some losing their livelihoods and many suffering wrongful prosecutions and convictions.

The IoD’s new policy paper – The Post Office Scandal: A failure of governance – recognised that it had caused “untold suffering to thousands of innocent people, and undermined trust in existing frameworks of governance and business leadership”.

The report has been written to capture some key insights from phase six of the Post Office Horizon IT Inquiry, which has focused on issues of governance. Several policy recommendations aimed at rebuilding trust have been made.

Disastrous human consequences

The scandal, according to the study, has shown that governance failure “can have disastrous human consequences”, adding that the roots of the issues are “not to be found in the lines of code in the Horizon software, but in the performance of the board, management and ownership function of the Post Office, who should have delivered better supervision and oversight”.

It adds that on the surface, the Post Office Ltd board “appeared to be operating normally”.

“Board and committee meetings were conducted in an orderly and well-documented manner. Many of those involved appeared to be well-meaning people who had convinced themselves that they were doing the right thing for the organisation.

“There was little evidence of tell-tale signs that have characterised other governance scandals, such as hubris, personal greed or large-scale fraud.

“Can any of us be confident that, if we had served on the board of Post Office Ltd as a non-executive director, we would have been able to see through the subterfuge and done something about it? That is a question that every director should now ask themselves with respect to their current board roles.”

Absorbed into a false narrative
The report notes that directors joining the Post Office board were “rapidly absorbed into the false narrative of the organisation – that subpostmasters were not to be trusted and the Horizon system was fit for purpose”.

“This attitude pervaded the culture and ultimately led to disaster,” it added, while also asking: “What are the attitudes or assumptions that are taken for granted by your board? Is there a willingness to discuss them or test them with fresh evidence?”

It also stresses that the Post Office board was “almost entirely guided by the perspectives of management”, highlighting that it “failed to adequately test these perspectives by engaging directly with other key stakeholders, such as subpostmasters, MPs, Fujitsu [the company that developed the Post Office’s Horizon IT system] or external experts”.

“As a result, it was vulnerable to groupthink and unable to gain a meaningful understanding of the organisation’s underlying culture.”

Elsewhere, the report looks at the multiple roles of a director, with many of those recruited onto the Post Office board seeing their primary role as “advising management on how to transform the commercial viability of the organisation”.

“Their focus was on future strategy rather than dealing with the problems of the present and the past. However, directorship involves a balance of activities, including holding management to account and delivering external accountability.”