Why Corporate Governance Fails and Lacks Sustainability

By Prof. Hubert Rampersad and Abiodun Fawumi   |   13 November 2015   |   12:30 am  

CORPOPOOR ethical leadership, lack of personal integrity, mismanagement, fraud, corruption, and violation of corporate governance rules are the main contributors towards bankruptcy and financial failures in large organizations.

Most of these organizations have comprehensive corporate governance codes in place, implemented by the left brain Big Four accountancy firms (PwC, KPMG, Ernst & Young and Deloitte), McKinsey, America’s Top Corporate Governance Law Firms, which apparently are not working at all. They made things worse and created a stable basis for more corruption.

Current approaches to corporate governance are extremely formal, bureaucratic, cosmetic, not holistic and non-authentic, and therefore provide no protection from potentially catastrophic ethical failures. We need a sustainable and innovative solution to this global epidemic urgently. It is time that we become aware that corporate governance cannot be controlled effectively with formal and exhaustive rules, regulations, guidelines, and procedures only. It’s about decency and personal integrity and this must be cultivated from within. Personal integrity has no need of rules and laws.

It must be a way of life.
Remember what Plato said in 340 BC: “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws”. Research shows that a large percentage of the world’s population is bad. For example, America has around 5% of the world’s population, and 25% of its prisoners. Roughly one in every 107 American adults is behind bars. Among them are also many Executives, leaders and professionals. Most corporate governance programs make things worse by creating a stable basis for more corruption and are doomed to fail.

Why don’t we learn from Plato and focus on creating a culture of good people, in which personal values are aligned with the laws and embedded in the mind of the people, instead of focusing on laws (corporate governance) only? I picked up where others left off by launching an innovative methodology for creating a culture of good Chairman’s, Presidents, CEOs, CFOs, managers and employees, in which high ethical values are aligned with their corporate governance rules, regulations and guidelines and embedded in their mind.

In this weekly column we introduce an authentic, holistic and sustainable governance system to prevent ethical failures. It’s based on Dr. Rampersad’s new book “Authentic Governance; Aligning Personal Governance with Corporate Governance“. Two main endorsements for this new book:

1) “Authentic Governance is a systematic, integrated, pragmatic, and innovative approach to corporate governance. By expanding traditional corporate governance concepts and integrating personal integrity and ethical leadership into one overall authentic governance framework, Dr. Hubert Rampersad gives us a new blueprint for sustainable corporate governance in which formal corporate regulations and personal values mutually reinforce each other. By unifying corporate ethics with individual ethics he has written an outstanding synthesis, which is addressed to the corporate challenges of managing in the 21st century.

2) This book makes a most useful contribution to the never ending challenge of protection from potentially catastrophic ethical failures. It serves as a practical guide and a tool kit for executives, political leaders, managers and others who aspire to realize ethical corporate excellence”.

Why Higher Education System Sucks
The main underlying reason for most corporate governance failures is the fact that the current higher education system sucks. Successful corporate governance implementation requires a multidisciplinary, authentic and holistic approach. Many top Law Schools and Business Schools (Harvard, Stanford, Yale, MIT Sloan, IMD, London Business School,..) have a mono-disciplinary curriculum with a narrow non-holistic and non-authentic focus. In this way most of these schools destroy creativity and many of their graduates in the corporate governance world (such as lawyers, advisors and executives) miss the bigger picture and do not think holistically. Due to this they focus solely on formal and woolly corporate governance regulations, procedures and guidelines.
Remember: creativity and innovation in the classroom come down to the professor’s creativity, self innovation and self-knowledge.

Many law, accounting and business management professors at the mentioned top schools are tom blame for most of the above mentioned corporate governance failures. They lack both emotional and Spiritual intelligence. This inner process starts with self-knowledge, or knowing, which leads to wisdom. Between knowing and wisdom lies an enormous distance which can be reduced by systematic application of our authentic governance system.

This will help them to create balance between the left and right sides of their brain. The left half of their brain has mainly an analytical, logical and quantitative function, while the right half of their brain has an intuitive and holistic function. They do not have a proper balance between the left and right sides of their brain. These professors and most of their graduates use the left side of their brain only; because of this, they miss opportunities that allow them to become more adept at using the right hemisphere of the brain and to deal with complex corporate governance problems in an integrated and authentic way. This is also the main reason why Harvard Business School professor Kaplan’s balanced
Scorecard implementations fail and lack sustainability.

Why don’t you do your own due diligence by analyzing the articles being published frequently in
Harvard Business Review, Harvard Law Review, MIT Sloan Management Review, California
Management Review, Yale Business Review, McKinsey Quarterly, and you will find out that almost
80% of the management and leadership theories and concepts being published in these top journals are not authentic, not holistic, woolly, and therefore cosmetic and not sustainable.

Prof. Hubert Rampersad is President of the Technological University of the Americas and Chairman of the Authentic Governance Institute in Silicon Valley, California while Abiodun Kayode Fawumi is the Publisher of Ekocity Magazine Lagos,Nigeria.



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