Last week, I spoke on the links between CSR, corporate governance and competitiveness at the 3rd International Conference on Corporate Governance in Istanbul. It is a topic close to my heart, as I have for a long time believed that corporate governance may be the best route to mainstreaming CSR.
When I was Director of KPMG’s Sustainability Services in South Africa, we were fortunate that Judge Mervyn King – under the auspices of the Institute of Directors and through the Code that bears his name – took a global lead on integrating CSR ideas into corporate governance.
The King Report, issued in 1994, was the first corporate governance code in the world to include explicit reference to stakeholders and the 2002 revised code (King II) included major sections on business ethics and integrated sustainability reporting.
King III, launched in 2009, goes even further. According to Mervyn King – who chaired also the conference panel I spoke on in Istanbul and who I interviewed while I was there – says that “the philosophy of King III revolves around leadership, sustainability and corporate citizenship.”
The reason for emphasising the King Code is because – through a research project I am doing on sustainability and corporate boards for Cambridge University – it is abundantly clear that this approach is the exception, rather than the rule.
For instance, in all the UK codes, from Cadbury through the Combined Code to the Walker Review, there is no direct reference to CSR, sustainability or even to stakeholders. So these have to be inferred through risk and reputation, or occasional references to environment, health and safety.
The US tackles the issue differently, through the Sarbanes Oxley Act, which is heavy on accounting prescriptions, including compliance with ethics codes. But I am sceptical about its effectiveness. The onerous requirements either result in companies skipping across the Atlantic to list in London, or instil a tick-box mentality.
It is worth remembering that Enron had an ethics code, ethics officers and many lauded CSR programmes, none of which diminished the culture of greed that caused its ultimate demise. As Mervyn King says: “Moses tried it and failed; Sarbanes and Oxley tried it and they will fail. We cannot legislate against dishonesty.”
So how do you embed CSR into corporate governance, and is there a link to competitiveness?
Part 2 to follow …
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