Transcript Corporate Governance

Corporate Governance
Ethics
and
The Role of CG Officer
Reputation
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Good reputation takes years to build.
Shades of reputation:
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Products
Management
Profits
Social posture
It takes just one incidence to destroy the
reputation of a company.
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Reputational Risk
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What can bring a company into disrepute?
What is the price of disrepute?
Is it worth losing/keeping reputation?
What if there is no direct potential of
losing reputation?
Defending and Sustaining Reputation:
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Sustaining reputation is painstaking
Defending reputation may often be selfdefeating.
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Ethics
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What is right?
How to enforce what is right:
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Law
Regulations
Codes
Standards
Generally Accepted Practices
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Code of Ethics
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Avoiding conflict of interest
Use / abuse of position, power or property
Confidentiality
Fair dealing with all
Protection of company property
Compliance with laws, rules
Encouraging reporting of illegal or
unethical behavior.
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Corporate Social Responsibility
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Minimize damage to environment
Liberal employment policy
Investment in local communities
Conducting business ethically
Respect for human rights
Fairness to all
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CSR and Reputation Risk
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Financial Implications:
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Impact on market performance
Failure to get good employees
Cost of deflecting negative publicity
Lower earnings / share price
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Shades of CSR
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Official posture and reality
Spending more on publicizing CSR than
actually doing it.
Lip service / Strings attached Welfare
IPPR Report says most CSR is lip service /
ulterior motive based.
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CSR – Who is watching what?
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Institutional investors
PIRC provide web based data on how
companies are acting on CSR, ethics,
environment, etc.
Regulators / Kings Report in SA
Disclosure Requirements
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Formulating CSR Policy
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Set a Code of Ethics outlining CSR Values
to be upheld
Establish current position on CSR values
Discuss with relevant stakeholders
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Employees
Pressure groups
Clients
Set up a system
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CSR Policy
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Devise CSR Policy
Prescribe systems
Establish responsibility for each party
Set realistic strategies and targets
Keep all concerned informed
Monitor achievements
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Bench Marking in CSR
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You do as much as others are doing.
Can any one set “minimums”?
Who ensures compliance?
How to monitor compliance?
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Sustainability Report
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Report on social, ethical, health and
environmental policies.
More focused on environment (i.e.
sustainability of the society) than any
thing else.
Not a report on company’s sustainability
(financial or otherwise).
Not yet mandatory in Pakistan.
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The Triple Bottom Line
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Prescribed by Global Reporting Initiative:
Financial Performance
Impact on environment and natural
resources
Social benefits and costs
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General Motors Model
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Economic Indicators
Environmental Indicators
Social Indicators
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Economic Indicators
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Revenue
Earning
Dividend per share
Sales Volume
Market Share
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Environmental Indicators
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Global energy use
Global carbon dioxide emissions
Global non-recycled waste
Global waste consumption
Company sites certified to ISO 14001
standards
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Social Indicators
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Community donations and sponsorships
Employees (number)
Diversity: %of workers female
Diversity: %of workers minority groups
Number of discrimination charges brought
against the company
Employee satisfaction
Injuries
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Public Sector
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Commonwealth Association for Corporate
Governance (CACG) Guidelines:
Major or significant companies are
government owned.
Directors are political nominees, not
independent.
Severe shortage of able directors.
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Whistleblowers
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Who is a whistleblower?
Connection of WB with CG
Honest and Malicious whistleblowers
Internal & External Whistleblowing
Area of concern:
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Employees (can) have access to all data
Whistleblowers are punished, not rewarded
Disregard as gripe
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WB – Best Practice
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Recognize the importance.
Set a procedure / prescribe channels
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Involve non-executives; avoid executives
Confidentiality
Legal Protection to whistleblowers
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UK’s Public Interest Disclosure Act 1998
Gagging clause in employment agreement
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Disclosure
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Internal and External Disclosures
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Good faith
No personal gain
Reasonableness
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Violation of law, rules of the company, injustice,
financial malpractice, risk to public
Internal before external
Laws have so far not been effective
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Recommended Guide on WB
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Documented procedure
Named office to handle WB
Examples of what is or is not misconduct
Consequences of false or malicious
allegations spelt out
External route also indicated
Investigation procedure
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CG Officer
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Who:
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CEO
Chairman, Board
CFO
COO
CS
Specially assigned officer
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