This blog post discusses the conditions of corporate governance failure within the network of stakeholders in the context of the management and refurbishment of Grenfell Tower. It was first published on the Oxford Business Law Blog

In the early hours of the morning of 14th June 2017 a fire broke out in one of the fourth-floor flats at a recently renovated tower block at Grenfell Tower, London, a social housing complex of almost 1,000 homes. By the time the blaze had been extinguished 72 residents were dead and an additional 70 others were injured. In total, over 250 fire fighters supported by 70 fire engines fought for over seven hours to control the blaze and helped 223 residents to evacuate from the worst residential blaze experienced in the UK during peacetime for a century. Following the fire, The Grenfell Tower Inquiry was established to establish the cause and origin of the fire and in a second phase to examine the building’s refurbishment and external cladding, examining key issues related to the responsibility for maintaining the safety of the building and the residents. The focus of our article is to examine corporate governance failure itself as a contributing factor in the fire, relying on evidence unearthed in the course of the investigation. Needless to say, our focus on the role of corporate governance in ensuring the safety of the residents at Grenfell Tower and on how corporate governance failures contributed to the tragedy is not meant to diminish the responsibility of key organisations and individuals in their duty of care in the management and maintenance of Grenfell Tower.

In most cases, effective governance and management require a governance framework as a tool for providing structure for delivering appropriate decision making and oversight. This enables effective governance by identifying and addressing governance risk and providing a construct for evaluating how management’s responsibilities fit with full oversight responsibilities. An effective governance programme includes effective risk management providing clarity in defining roles, delineating duties, preventing duplicated efforts, identifying potential blind-spots, and assisting these efforts by providing structure to policies and tools. This allows decision makers to focus on the relevant and appropriate issues and prioritize their time and resources. In addition, it provides a structured way to collaborate with stakeholders on specific issues with minimal risk of confusion and loss of productivity. When conceptualised this way, a corporate governance framework can be perceived as a systematic approach to prevent failings by identifying inherent risks and addressing collective actions to mitigate these risks and foresee negative outcomes or potential threats. 

Ultimately, in the case of Grenfell Tower, the overriding objective of the (corporate body’s) governance framework should have been to keep residents safe. Each of the organisations that was involved in the management and refurbishment of Grenfell Tower was subject to a specific professional regulatory framework. However, examining the multiple failings shows that when key decision-making organisations failed to meet their obligations under the framework, there were few consequences. The choices made at Grenfell suggest that residents were not the core priority of decision makers, for example, in opting for slightly cheaper but less fire-resistant cladding in the refurbishment. Such failures were not a new phenomenon but part of a pattern of governance failure in similar organisational structures. 

When a catastrophic event occurs, it is generally too simplistic to attribute blame to a prime cause or specific event. Typically, a chain of events leading to the catastrophe is triggered by a breakdown within a structure that fails to address problems as they occur and mitigate risks as they arise. In the case of Grenfell Tower, a faulty fridge/freezer was the ignition source. It is nevertheless understood that fires are statistically calculable occurrences and the extent of the fire that followed the initial source and the difficulty in accessing the building and saving lives can be attributed to failures to properly manage the safety of the building. These ‘breakdowns’ relate to a wide variety of governance failure sources, not least due to the tenant management organisation’s focus on a series of cost reductions rather than more precautionary measures, a lack of engagement or apparent concern with other stakeholder groups, and decision making by the local council likely to be motivated by negative racial and social class stereotypes about tenants. 

A plausible explanation for the careless attitude towards establishing effective oversight measures is that under the previous arrangements the Kensington and Chelsea Borough council was directly responsible for managing social housing. Under its long-term public remit it had developed a suitably established system for managing properties, employing dedicated individuals with a clear understanding of their roles, with little scope for compromising on safety and largely free of political influence. This changed in 1995 when Kensington and Chelsea Tenant Management Organisation (KCTMO) was established to manage 10,000 local council properties. Tenant Management Organisations such as KCTMO are founded when residents create a corporate body, which appoints a management committee to run the body, funded by management fees paid by the Council under the agreement.  Setting up KCTMO allowed tenants to take on responsibility for housing management, but the scale of responsibility was immense and contentious. Additionally, the knowledge accumulated through the previous arrangements was not retained within the new corporate body: priorities changed, partly through the perception that tenant involvement conferred sufficient legitimacy on decision making, partly as the priorities of the management team changed and partly because of the increased scale of responsibility delegated to a small and inexperienced organisation.

The Grenfell Tower fire has become an iconic symbol of the catastrophic events that can occur if there is a failure of corporate governance. It is important to remember that corporate responsibility encompasses the duties and responsibilities of corporations, but such duties are the responsibility of a variety of social actors and not merely focussed on codes and reporting procedures. It is true to say that some lessons have been learnt about potential risks of inappropriate cladding and evacuation advice but there is no evidence that the lessons of the governance failure that led to the choice of poor redevelopment, inappropriate safety standards and the procurement of unsafe cladding have been learnt.

 

How to cite this blogpost (Harvard style)

Muzamil Khan N and Haynes P  (2021)  The Role of Corporate Governance Failure in the Grnfell Tower Fire Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2021/08/role-corporate-governance-failure-grenfell-tower-fire (Accessed [date])