06 Dec Culture for Good Governance
As I said in my previous blog, there’s plenty of principles, policies and procedures for good governance, both for commercial organisations (e.g. ASX Corporate Governance Council) or not-for-profits (e.g. AICD). But then each of us have to stand back and ask “is this right?”[1] Hence, the tone of the good governance guidelines is shifting from, for example, report on your processes to “act ethically and responsibly” to a positive obligation to “instil the desired culture” so as to protect the listed entity’s social license to operate”[2] i.e. community acceptance of an organisation and its operations.
This reflects modern practice in Corporate Social Responsibility (e.g. the IAOP Guide to Corporate Responsibility)[3], global business (e.g. Manifesto for a Global Economic Ethic)[4], and risk management or regulation (which is outcome based not prescriptive). It also begins to shift the focus away from ‘tick the box’ (if not why not?) compliance administered by a regulator, to evidence-driven solutions by the people closest to the issue (here’s our evidence how we can meet the required outcome). Instilling the desired culture is, therefore, more than just to “act ethically and responsibly” but includes empowerment and accountability delegated to the lowest (reasonable) level as well as collaboration with others. Good governance culture recognises a responsibility which is greater than just customers and shareholders but extends into the wider community. A regulator may approve or remove a business license to operate, but it is increasingly the community which grants the social license to operate (SLO). It is difficult to define and impossible to measure, but think of BP’s Deepwater Horizon oil spill in 2010, tobacco companies mea culpa or the Bangladesh factory collapse in 2013, then look at the financial and legislative impacts of losing the community’s trust?
Kate Gilmore[5], the deputy high commissioner for human rights at the UN Human Rights Office, has said in marking the 70th anniversary of the Universal Declaration of Human Rights: “What was extraordinary [is that] we didn’t need it to be told we had rights,” said Gilmore. “We needed it to be told you had rights; that I hold my rights only to the extent that they don’t encroach on your rights.” I see SLO like that, an expression of co-dependency where we ask the question “is it right for them as much as for me?”
The Australian Stock Exchange’s Corporate Governance Council Draft 4th Edition Principles and Recommendations is a good place to start arguing the merits and manageability of incorporating the idea of social license to operate and inculcating a culture of acting lawfully, ethically and in a socially responsible manner. So too, the Manifesto for a Global Economic Ethic which lays out the fundamental principles and values of a global economy. Both seek to establish a dialogue between legal rights and what is right; company shareholders and community stakeholders, you and me. Because it does ultimately come down to each of us. As Eleanor Roosevelt, who helped draft the declaration, said “Where, after all, do universal human rights begin?” I’d suggest that they begin with us, operating ethically as good governors within our sphere of influence.
[1] As Justice Neville Owen said in the Royal Commission into the collapse of HIH Insurance in 2003, and repeated this year as the chair of the Truth, Justice and Healing Council coordinating the Catholic Church response to Child Sexual Abuse
[2] Australian Stock Exchange’s Corporate Governance Council 4th Edition Principles and Recommendations released for comment in May 2018
[3] https://www.iaop.org/Content/23/152/3874/Default.aspx
[4] https://www.globaleconomicethic.org/
[5] https://www.businessoffashion.com/articles/news-analysis/the-universal-declaration-of-human-rights-70-years-on-kate-gilmore
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