Corporate governance: A simple matter of values
There is certainly no lack of literature on the topic of corporate governance, both in the academic and professional arena. Theories and best practices abound but time and again, corruption rears its ugly head in large corporations.
Corporate governance naturally comes to the forefront every time a scandal spews from the business world, RCBC being the latest publicly listed company embroiled in this controversy.
For a layman, corporate governance were words that didn’t really mean much. This changed with the advent and growth of social media, corporate citizenship and social activism. Events like these were no longer ignored nor swept under the rug. Society became increasingly indignant with corporate stories of greed and moral corruption.
Why then do these events occur despite existing regulations? As a matter of fact, history has shown that after every scandal, new and stricter rules ensue, but it still didn’t guarantee good corporate behavior. Even the most stringent rules are only as effective as the people who must abide by them. And why do exemplary companies awarded with regional and international corporate governance awards, like RCBC, fall into this quagmire of questionable governance?
One of the responsibilities of the board of directors is to ensure the proper governance of their organization’s resources and address the needs of its various stakeholders. Apart from formulating business strategies and policies, a director is also held accountable for actions taken by the company and monitoring management. A director’s position in the board carries a lot of weight in the downstream activities of the various functions of an organization. We may have all the necessary tools and processes in implementing good corporate governance but this is apparently not enough, as manifested in quite a number of corporate scandals over the last thirty years around the globe.
What is needed, beyond compliance on form and structure by which corporations are regulated and assessed, is an affirmation of ethical values in corporations. And this has to be imperatively paired with sound leadership of the CEO and Board of Directors.Corporate participants in all levels must continuously be trained in ethical leadership so that they may be able to demonstrate moral behavior for followers to emulate.
Such training must reiterate and reinforce the values by which we live decent lives. Ethical stewardship (Caldwell et al, 2008) is good for business and involves demonstrating respect for values that include honesty, fairness, equality, dignity, diversity and individual rights. If only institutions are always run with ethical behavior, then people in organizations wouldn’t find themselves and their companies involved with these debilitating circumstances.
Unfortunately, it isn’t as simple as it sounds. It takes time for individual and collective efforts to build and form lasting values in organizations. Executive training and development is a cornerstone of organizational growth and development.
As part of organizational values formation, it is important to remind big companies the true objective of forming corporations. Apart from providing fair returns to the company and its investors, it is the responsibility of corporations to contribute in the task of nation building through economic development (Philippine Corporation Code, 1980). Further, and because of the concept and hegemony of shareholder supremacy, this responsibility is more often than not marginalized.
Controlling shareholders also need to be reminded that corporations are not exclusively “owned” by them and that corporations belong to all shareholders regardless of the number or percentage of their shareholdings. Gone were the days when corporations were considered “private.” Not only are they accountable to their shareholders, we are now living in an era where corporations are accountable to the various publics, rightfully demanding ethical behavior from these giants. It is critical that the various stakeholders of the corporation are protected and that firm profitability is certainly achievable without sacrificing good corporate governance.
On a final note, it is highly recommended that the Philippine educational system be able to include corporate governance as a core subject in the graduate school curriculum. Good values education must be a consistent element in a person’s educational journey, hopefully that will translate into concretized actions. The future generation of entrepreneurs and operators of these big corporations should be able to understand and apply the concepts of good governance and its consequences for the betterment of society in which they live in.
Leveric T. Ng, DBA, is an adjunct faculty of the Ateneo Graduate School of Manila and Enderun Colleges, and teaches Corporate Governance, Corporate Social Responsibility and Marketing. He is a Fellow of the Institute of Corporate Directors and is a partner in Multistream Consulting Group Inc. He can be contacted at [email protected].
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