GlaxoSmithKline ranked worst in business group's list of well run companies in the UK

Drinks giant Diageo topped the Institute of Director's ranking for good governance

GlaxoSmithKline was at 103 in the IoD ranking. (AFP/Getty)

Pharmaceuticals giant GlaxoSmithKline (GSK) has been ranked bottom in a list of the UK's top companies for good governance.

The owner of well-known consumer brands, such as Aquafresh, Horlicks and Sensodyne, came in at number 103 in the Institute of Director's 2017 good governance report.

The IoD explained that GSK's low ranking was down to its score in the audit and risk/external accountability category of the report, which had a strong weighting in this year's overall ranking and was GSK's worst score across the categories.

Rankings are based on 47 factors relating to how companies are run, including board diversity, directors’ pay, how long businesses have been with an auditor and whether they have a whistleblowing policy. The list included 103 of the largest companies.

A GSK spokesperson said: “We take our responsibilities with regard to corporate governance very seriously, particularly in areas such as executive pay, board governance, employee diversity, audit management and relations with external stakeholders. While there is always more we could do, we don’t recognise the conclusions of this work and will seek to understand the findings fully.”

The next lowest ranking businesses on the list were cruise company Carnival at 102 and security services firm G4S at 101.

Ken Olisa, deputy chairman of the IoD and chairman of the Good Governance Report advisory panel, said: “Corporate governance has rarely been out of the headlines since we first set about creating a way to rank the UK’s top companies’ performance in 2015, and with each scandal pressure grows for the imposition of tougher regulation along with calls to report statistics of dubious merit. This is the wrong approach. Corporate governance is about much more than compliance – it’s about achieving competitive advantage.”

The ranking is supported by the Chartered Quality Institute (CQI). Its director of policy, Estelle Clark, said the report challenges the assumption that corporate governance is solely a financial issue. “Corporate governance is much more than the narrow issue of executive pay and the misuse of zero hours contracts. Companies with potential governance issues will not find the remedy solely in the audit and remuneration committee.”

Drinks maker Diageo, which owns Guinness, Smirnoff and Johnnie Walker, was the UK’s top company for good governance.

Diageo was followed in the rankings by insurer Aviva in second place and engineering firm GKN in third. Also in the top 10 were Barclays, Smiths Group, Prudential, RSA Insurance Group, International Consolidated Airlines, InterContinential Hotels Group and Compass Group.

Across the 100 companies studied, IT firms underperformed compared to the average score, while energy businesses outperformed.

The size of the company seems to have no effect on the position of the 100 companies studied.

The IoD said its intention in producing the report is to encourage companies to consider a broad range of factors when doing a health check of how well their board and executive are functioning.

The report combines publically available data with over 2,000 rankings of the companies from people with knowledge of what good governance looks like, including members of the IoD and the CQI.

The number of measures the report examines was expanded for 2017 to give a more detailed view of how well a company works for shareholders, employees and customers.