Directors accused of corporate governance failures and corruption
Too many directors of companies across the globe are guilty of corporate governance failures and – in many cases – of corruption.
It is up to board directors to ensure corporate accountability, transparency and probity.
Globally, there’s a desire for effective leadership. Authentic leadership is essential for achieving any of society’s goals, whether in politics, business or community-building.
The global corporate scandals of the past decades, from Enron in the early 2000s, through the banking crisis in 2008 to the Barclays interest rate-fixing disgrace in July last year have highlighted the consequences of unethical leadership and poor corporate governance.
Recently, South Africa has been hit by a damning revelation of widespread corruption and collusion in the construction industry, and the multi-billion rand collapse of South Africa’s biggest non-listed company, First Strut.
Corporate greed and corruption is an international phenomenon that – to a large extent – is responsible for the current global financial turbulence. The scale of corruption and its impact on ordinary citizens is unparalleled.
Transparency International’s annual survey of perceived levels of public sector corruption paints a picture of the public sector in crisis around the globe. And the private sector is a partner in crime. There is evidence of institutionalised, systemic corruption with business buying political favours and politicians selling them.
We are arguably in the midst of one of the greatest transformations in human history. Old centres of power are declining; technology is driving the rapid pace of change. At this time of unrest, uncertainty and risk, basic models are failing. The demand for ethical leaders – leaders to navigate through these challenging times has never been higher.
There is increasing emphasis on strengthening the external governance environment. Transparency International argues that its four governance principles of transparency, accountability, integrity and citizen participation are rooted in human rights. These principles are underpinned by multiple pieces of legislation in the corporate world.
However, a recent Ernst & Young survey showed an increase in corrupt behaviour in business. Just over 40% of board directors and senior managers were aware of irregular financial reporting in their company. Increased competition and the rapid rate of change lead to the dichotomy of agility versus good governance.
Author Bennett Freeman argues for sustainability as a broader concept than governance, regarding it as proactive versus reactive. “A company’s job,” he says, “isn’t just to make profit for stockholders, but to provide value for all its stakeholders – community members, trade unions, the public at large. And the one shouldn’t come at the expense of the other.”
Freeman believes ethics and business go hand-in-hand. “Business is a human institution and treating people with respect, dignity and integrity applies as much in business as in life,” he says.
