Code of Good Governance (1)
THE collapse of high profile international businesses, giant banks and mega-multinational companies over the past several years, the recent unprecedented worldwide financial crisis, the power shift from public to private sector through converting state-owned enterprises to joint stock publicly-owned companies, the transfer of technology, and globalization are compelling reasons for good corporate governance practices to be applied. Large-scale accounting scandals that brought large companies in trouble are often caused by unethical behavior of top-executives.
Poor leadership, mismanagement,
fraud, corruption, and violating corporate governance rules are the main contributors towards bankruptcy and financial failures. The human element represented by the directors and employees is the major cause of these failures. Especially unethical behavior of leaders is the main cause of bankruptcy and financial failures.
Remember what Alan Greenspan, Former Chairman of the Board of Governors of the US Federal Reserve System, said: “Our market system depends critically on trust— trust in the world of our colleagues and trust in the world of those with whom we do business… I am
saying that the state of corporate governance to a very large extent reflects the character of the CEO.”
Therefore, the corporate governance codes around the world should strongly advocate a focus on personal integrity development within organizations.
Against this background, many governments and large companies everywhere are currently very keen to revamp, develop, and implement a corporate governance code to address above mentioned shortcomings. Unfortunately, all these codes are cosmetic, not holistic and not authentic, and
therefore not sustainable. All these codes do not provide adequate protection. For example, top
executives in Europe and the USA found easy escape routes to misinterpret their code and increased their salary significantly. Their corporate governance code did cost a lot of money without anything
useful yielded, it has made things worse.Now the government in these countries is thinking about
embedding the code into law with heavy penalties. The situation in these countries is becoming
Corporate governance practices worldwide via traditional corporate governance codes are extremely formal, ineffective and doomed to failure. Business ethics cannot be stimulated control with all kinds of
formal and exhaustive rules, regulations, guidelines, and procedures.
It’s about decency and personal
integrity, and this must be within you. It must be a way of life. Remember what Albert Einstein said:
“Try not to become a man of success but a man of value”. As demonstrated by Enron and others, traditional corporate governance codes provide no protection from potentially catastrophic ethical failures. Company integrity must always start with personal integrity. It must be an informal learning
process and a way of life, based on alignment with yourself and alignment with your company.
This ethical process must be promoted and communicated within the whole company to all stakeholders consistently. In this way ethical behavior will become a routine in the whole organization, and leaders and employees will gain more understanding about their responsibility with regard to ethical behavior.
They will understand that it is their responsibility to act ethically, on duty as well as off-duty.
This is a more sustainable, comprehensive and holistic approach to ethics and social responsibility.
In the following articles we will share the most important regulations, guidelines, procedures and policies with you related to good corporate governance.
This is part of a more sustainable, authentic and holistic approach to corporate governance, which we call authentic governance. This column good corporate governance is drawn from the book “Authentic Governance; Aligning Personal Governance with Corporate Governance” (Dr. Hubert Rampersad, New York, 2014). This article will be continued
in the next part of this column.
Prof. Hubert Rampersad is President of the Technological University of the Americas and Abiodun Kayode Fawumi is the Publisher of Ekocity Magazine.