The recent case of director’s remunerations in Belgian Intercommunal agencies and discussions about remunerations of the family members of French presidential candidates seem quite damageable for our continental politics. Without judging any of the individual cases, it might sadly insinuate or even confirm the political culture of “serving yourself” nicely called in Dutch “de graaicultuur” that I would try to translate as “a political culture of greedy groping”.
While in our democratic societies are built on the so-called “trias politica” principle, being the separation of powers, we can still hope that justice will do its work case by case and will have enough means to scrutinize on a fair and impartial basis. But we might expect that the logic legal reforms to come, will not only affect public mandates but that politicians will also regulate some matters in the corporate world in a sense of “we were not the only ones doing wrong things”.
Many industry leaders like Sir Adrian Cadbury with his code in UK from 1992 and like Baron Buysse and Baron Herman Daems and their codes as the result of the Belgian GUBERNA initiative started in 1995, proposed soft rules that non-listed and quoted companies implemented in their governance policies.
Scandals in industry and banks in the first decade of the 21st century turned some parts of that soft law into compulsory rules. Beside these new sound legal obligations, a debate culture within the management team and board still seems the best ground to foster a really good governance of each company and its relations with many of their stakeholders.
“A debate culture within the management team and board still seems the best ground to foster a really good governance”
The risk exists that a corporation can comply with all legal governance obligations and explain in its annual report the variances with the soft law suggestions, but misses completely internally the aim of the law reforms since the debate culture was never implemented at different levels inside the company. Silent and uninterested (independent) directors or member of audits committees, climate of fear within a management committee, inconsideration of the reasonable questions by representatives of the trade-unions in the HR bodies, are some examples far away of best practices of corporate governance, especially when the formalities are respected but the debate culture remains totally avoided. In other words, one can install a window dressing corporate governance charter for the outside, but maintain a sterile debate culture inside. Unless a whistle-blower appears, this practice can avoid sanctions for a while, but at its own risks, especially for sound management.
On the contrary good governance is the base layer before a company can start a credible and sustainable corporate social responsibility (CSR) policy. And the question rises whether each company needs such policy or at least a CSR reflection. Indeed, the social aim of any corporation in its by-laws refers to selling activities, production, dividend policies, etc. So, one could question, from a rigid point of view, we should embarrass companies with e.g. sponsoring cultural events, putting effort in inclusion in the labour force of disabled people, considered as being less productive etc. Yes, all this is not in the by-laws; these alternatives efforts were not top of the mind of the founders of the company at its inception.
“Good governance is the base layer before a company can start a credible CSR policy”
In the first decade of this century many listed companies disclosed, sometimes in a separate “social annual report” al their efforts spent in e.g. remediation of industrial sites, installation of elevators in their facilities in order to welcome more disabled employees or visitors, sponsoring of the global charity efforts for the victims of the Tsunami in Japan (where they mostly had a subsidiary and … clients), promoting green policies by installing a bicycle storage encouraging the staff to leave their cars home etc etc.
Those companies were and are analysed by environmental, social and governance research agencies, like VIGEO and EIRIS (merged in 2015) and proudly publish this positive audit results. Based on these results listed companies can obtain CSR labels and join sustainability indexes (e.g. Ethibel) followed by “ethical” asset management funds. Most of the latter are signatory of the UN PRI, the Principles of Responsible Investment. If these fund managers are in a buying mode and since their holding approach is driving on the medium long term, one can conclude that an ethical label does support a share price, so that indirectly shareholders value is created without a real P&L effort.
We can only support these CSR initiatives, but one must admit the hype of 10 years ago, is quite over and e.g. in many organigrams of HQs the sustainability department is not a direct report department of the CEO anymore. Has, due to the crisis of the past 10 years, the focus of the average CEO been driven more on the profitability, recovery, distressed situation and others bottom-line actions?
In Marketing 3.0, world-leading marketing guru Philip Kotler explained in 2010 why the future of marketing should lie in creating products, services, and company cultures that inspire, include, and reflect the values of target customers. The latter shouldn’t not be considered as pure “consumers full stop”. As per that Marketing 3.0 model the consumers should be treated with many regards since they are said choosing companies and products that satisfy deeper needs for participation, creativity, community, and idealism. Is it a coincidence that in the same time frame of the reduced interest for CSR this innovative model of marketing became quickly superseded?
Both two previous paragraph may be an excellent question for larger research. We, from our side, can only continue to endeavour all initiatives reflecting the aim of the senior management of our enterprises, that like citizens, their corporations have a leading role in the implementation of sustainability of our societies and our planet.
“Enterprises have a leading role in the implementation of sustainability of our societies and our planet”.
And there are many small examples, with smaller costs that many corporations, SME included, can – in 2017 – implement CSR rules and bundle those in public charters, still being in the course of pursuing their business goals.
Investment groups can make individual lists of industries they avoid to invest in (e.g. weapons, armament, animal testing, tobacco and hard drugs, …). Corporate policies can ban all kind of discrimination based on race, color, sex, sexual orientation, religion, political opinion, age or nationality. At the same time, they can put into place checks, controls and procedures to ensure that all their suppliers and sub-contractors are following the same ethical standards. They can include in their distribution and supply agreements anti-bribery standard clauses. HR department can outline measures (in each employment agreement) that can and will be taken in order to prevent corruption.
If the listed companies and even public agencies would have come to enhanced soft laws like mandatory reporting in annual reports of their CSR commitments and recent initiatives, including gender reporting of the pay-roll (numbers per capita, but also salaries), one may have avoided less essential or effective legal initiatives like debatable quota obligations that were adopted in board representation or in other platforms. Those coercive rules should be the ultimate lawmaking weapon.
“Pro-active self-regulating rules could be more effective than legislative ones”.
A candidate for French Presidency (saying a Presidential candidate is less neutral IMHO and inappropriate today for our firm) proposes a law publishing the names of companies providing lower salaries for one gender in the same job. This shows that this kind of compelling measures can come, whereas pro-active self-regulating rules of transparency could be more effective if a company and its management aims for a perfect information of all its stakeholders.