| By Gavin Chait,
on 03 July 2007
|
 Mervyn King; governance of the triple-bottom-line So many justifications for the new rules introduced to curb financial excess, to reign in "irrational exuberance", begin with the words, "After Enron." Financial directors have a heavy burden to bear. Executives must be more responsive to boards. Boards must be more responsive to shareholders. Thank goodness executives can still buy good feelings and happy times by dispensing their shareholders' money on charitable works. It's hard for shareholders to complain because then they'll simply look selfish. Philip Armstrong, board-member of the International Corporate Governance Network (ICGN) and head of the World Bank Global Corporate Governance Forum, feels that this should change.
Responding to questions during the press-launch of the ICGN's annual global conference taking place this week in Cape Town, he expressed concern at the way in which corporate benevolence is not subjected to scrutiny. "We need to move away from the idea of corporate philanthropy to integrating it within the overall system of Corporate Governance. It needs to be integrated into the standard auditing and reporting process." There are two ends within corporate social investment, he says: "Number one, what a company says it is doing. Number two, the validation of the work that the company claims is being performed." Whythawk has long held that companies outsource their reputational risk when they choose to associate themselves with development organisations. The relationship is lopsided with companies exercising little or no corporate governance yet building their community reputations based on that connection. Sometimes that can go disastrously wrong as with Oprah Winfrey's sponsorship of Jacqueline Maarohanye (the "Angel of Soweto") currently on trial for fraud, as well as kidnapping and assaulting a journalist. Winfrey's representative in South Africa is a co-accused after being caught up in the debacle. Chatting after the briefing Armstrong expressed his frustration that governance often lags scandal. Often directors wait until the press have uncovered wrong-doing or embarrassment before putting oversight structures in place. By then a firm's reputation may already have been damaged. Besides the direct concern of the value of unscrutinised development initiatives is also the concern of the destruction of company value. If executives are unable to exercise governance of their charity projects how are they running the core business? Whythawk continues to engage with companies wishing to take steps to ensure that their corporate social investments are not just seen to be good, but are achieving meaningful development results. The ICGN conference concludes on Friday with a session led by Mervyn King, chairman of the King Committee on Corporate Governance in South Africa, to discuss exactly these points. We're looking forward to it. |
