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Corporate Governance - ICSA: The Governance Institute

ICSA adopts Day 5 of Ethics Month examines how corporate governance contributes to an ethical business.

 

Corporate governance and ethics are sometimes viewed as the enemies of commerciality, the beta blockers that put the brakes on entrepreneurship. However, making sure that your business remains on the right side of the law, treats people fairly and is engaged in good practice is not something to be dismissed so lightly. One of the best means of ensuring business sustainability is by engendering trust, both through governance and through demonstrably good corporate behaviour, a business benefit about which ICSA: The Governance Institute feels strongly.

Most people would say that it is wrong to do something that is illegal or morally reprehensible. We positively relish in stories of good triumphing over evil. It is heart-warming to read that churchgoing centenarian Alexteen Roberts, who was mugged on her North London doorstep in August, received several thousand pounds from crowd funding just a month later to help her overcome her ordeal. We feel less magnanimous when reading that Sports Direct’s Mike Ashley produced a bundle of fifty pound notes at his Derbyshire warehouse where staff are paid the minimum wage and conditions have been likened to those in a Victorian workhouse.

Businesses should remember that people lie at the heart of what they do. People buy the products that they create and people make the products that are bought. Sports Direct’s share price has slumped and not just because of its catalogue of corporate governance failings. People do not want to buy products from companies where they think that employees are being mistreated; and investors are beginning to wake up to this.

Executives, overseen by their boards, have a responsibility to build and foster a culture that takes into consideration the views of all stakeholders, not just shareholders. They must also consider the social environment in which the company operates because compliance with local mores gives the company 'its licence to operate’. Sir Philip Green's reputation would not have taken the battering that it has in recent months if he had considered the fate of the 22,000 pensioners who had worked for BHS before he sold it to a twice bankrupt. Similarly, BP managers might not have been so quick to seek short-term gains at the expense of safety procedures if they had contemplated the possible impact that the Deepwater Horizon disaster would have on the environment, the livelihoods of the local residents, BP’s reputation and on its investors and their investees as huge fines ate into its profits.

It is because businesses sometimes need a gentle nudge (or a firmer hand when necessary) in the right direction that the role of our members is so crucial. Anyone who is employed as a company secretary or governance professional ought to be aware of the ethical issues or responsibilities facing their business. The company secretary is in the privileged position of being the conscience of an organisation and it is a role that we take most seriously. That is why we have a Code of Ethics with which our members must comply in order to avoid bringing the profession of chartered secretary into disrepute.

Our code of professional ethics and conduct comprises four core principles to which all members, students, graduates and affiliated members must adhere. These are integrity; maintaining a high standard of service/professional competence; transparency; and professional behaviour.

Integrity is crucial as companies secretaries are required to be impartial, independent, informed and professional in their business dealings. The job of company secretary cannot be discharged fully and properly if a person does not display honesty and adhere to and practice strong moral principles. How can one advise others about conflicts of interest, for example, if one accepts or offers improper gifts or hospitality?

Company secretaries must consider the ethical issues and the groups of stakeholders who are affected by the company’s decisions and avoid involvement in any unethical, misleading, illegal or obscure behaviour. We expect our members to be open and frank in any business dealings, not be underhand in business transactions and to treat all work as if it might be reported in the public domain.

This last point is key. Many of the corporate governance failings that we have seen in the past could so easily have been avoided if someone had simply questioned whether the company’s business decisions would hold up to public scrutiny. People like honesty. They like to feel that the money they spend is, in its turn, being spent in an honest and defensible manner.

Corporate governance, ethical behaviour and big business can actually sit comfortably together. If an organisation has a healthy corporate culture, built upon and around a clear business purpose, a set of principled and overarching values laid down by the board, including adherence to ethical behaviour and underpinned by a strong governance regime, that will contribute significantly to the restoration of trust in business and in delivering long-term business success.

Simon Osborne

Chief Executive
Simon Osborne is Chief Executive of ICSA and Joint Head of ICSA Board Evaluation.

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