Corporate Governance Ethics and The Role of CG Officer Corporate Governance Ethics Ethics and and The Role of CG Officer The Role of CG Officer
Corporate Governance
Ethics and
The Role of CG Officer
Corporate Governance
Ethics Ethics
andand
The Role of CG OfficerThe Role of CG Officer
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Reputation
Good reputation takes years to build. Shades of reputation:
Products Management Profits Social posture
It takes just one incidence to destroy the reputation of a company.
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Reputational Risk 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:
Sustaining reputation is painstaking Defending reputation may often be self-
defeating.
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Ethics
What is right? How to enforce what is right:
Law Regulations Codes Standards Generally Accepted Practices
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Code of Ethics
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
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
Financial Implications: 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
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?
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
Set a Code of Ethics outlining CSR Values to be upheld
Establish current position on CSR values
Discuss with relevant stakeholders Employees Pressure groups Clients
Set up a system
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CSR Policy
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
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
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
Prescribed by Global Reporting Initiative:
Financial Performance Impact on environment and natural
resources Social benefits and costs
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General Motors Model
Economic Indicators Environmental Indicators Social Indicators
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Economic Indicators
Revenue Earning Dividend per share Sales Volume Market Share
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Environmental Indicators
Global energy use Global carbon dioxide emissions Global non-recycled waste Global waste consumption Company sites certified to ISO
14001 standards
Social Indicators Social Indicators
Community donations and sponsorshipsCommunity donations and sponsorships Employees (number)Employees (number) Diversity: %of workers femaleDiversity: %of workers female Diversity: %of workers minority groupsDiversity: %of workers minority groups Number of discrimination charges Number of discrimination charges
brought against the companybrought against the company Employee satisfactionEmployee satisfaction InjuriesInjuries
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Public Sector
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
Who is a whistleblower? Connection of WB with CG Honest and Malicious whistleblowers Internal & External Whistleblowing Area of concern:
Employees (can) have access to all data Whistleblowers are punished, not
rewarded Disregard as gripe
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WB – Best Practice
Recognize the importance. Set a procedure / prescribe channels
Involve non-executives; avoid executives Confidentiality
Legal Protection to whistleblowers UK’s Public Interest Disclosure Act 1998 Gagging clause in employment agreement
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Disclosure
Internal and External Disclosures Good faith No personal gain Reasonableness
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
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
Who: CEO Chairman, Board CFO COO CS Specially assigned officer