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Does corporate governance make a difference?

I wonder about this.

I’ve studied corporate governance for many years. Indeed, doing so was one of the reasons I founded Ethical Corporation back in 2001.

The infamous Ford vs. Firestone case really got me interested in governance, crisis management and corporate responsibility, some ten years ago now.

Since then Ethical Corporation has held conferences on the topic of Governance. I’ve attended many others, and even stumbled my way through an MSc in Corporate Governance and Ethics at Birkbeck, where I now teach corporate responsibility.

But what difference, I really do wonder, do governance ‘structures’ make when it comes to sustainability?

I’ve heard of at least one UK major international board figure saying that two tier boards work better than one tier, and also arguments the other way.

I tend to believe now that when it comes to governance and sustainability, it’s all down to leadership, not committees, structures and articles of association.

Look at the best companies on responsible business. I won’t name them here, but they just get on with it. They don’t hang around waiting for committees to recommend action, they do things, things that matter.

But having said that, it can’t hurt I guess, to do what Intel has just done:

“Intel directed its outside legal counsel to “write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee’s charter, was part of the fiduciary duty of company directors.””

P&G have done the same thing. See page three on this link for details.

I guess it is important to formalise this commitment to corporate responsibility. Leadership, after all, is all very well, but leaders do not last for ever.

For smaller responsibly-minded firms, whose mission revolves around sustainability, it is much easier to embed ethics into the company’s raison d’etre. They will likely only ever pick leaders who have really shown they understand why CR is a business imperative.

But for larger firms such as Intel and P&G, their next leaders could come from anywhere in the business world, and are unlikely to be a sustainability hero.

So formalising responsible business as part of the company mission is surely an important shift to help maintain momentum.

Of course, if either of those firms picks a leader who is not really interested in the issues, a line in a report or on a website, or in a document won’t matter a jot. Which is why leadership is so much more important than governance structures.

So governance around sustainability does matter, just not as much as the SRI and governance activists would like to think it does.

2 Comments

  1. Great article, Toby. I pick it up for my sustainability blog. You are right, leadership is key to corporate sustainability (and anything else, really). The only issue with great leaders is that they usually don’t stay too long in the same company. It’s a very personality-bound asset …

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