Fu­tureBoards is chal­leng­ing tra­di­tional cor­po­rate gov­er­nance mod­els.

Norway-Asia Business Review - - Contents - SOFIE LISBY

Thecor­po­rate world, like most other fields, is full of a cer­tain kind of jar­gon, which mean­ing to out­siders can be ar­bi­trary at best, non­sen­si­cal at worst. Open any busi­ness pub­li­ca­tion such as Forbes or the Har­vard Busi­ness Re­view and hardly an ar­ti­cle will fea­ture with­out words and phrases such as ‘ dis­rup­tion’, ‘best prac­tice’ and ‘think out­side the box’.

To many, ‘ cor­po­rate gov­er­nance’ is such a phrase. Con­trary to state gov­er­nance, cor­po­rate gov­er­nance is con­cerned with the way busi­nesses are run, and as such, is of­ten prac­ticed be­hind closed doors, away from the scru­tiny of the pub­lic eye. As a re­sult, for a long time, the gen­eral pub­lic knew very lit­tle – and per­haps cared very lit­tle – about how busi­nesses were run. To­day, how­ever, that is no longer the case.

“Com­pa­nies are fac­ing a very dif­fer­ent re­al­ity to­day,” says Turid Elis­a­beth Solvang, Founder and CEO of Fu­tureBoards, a col­lab­o­ra­tive plat­form which aims to drive the evo­lu­tion of cor­po­rate gov­er­nance by pro­vid­ing phys­i­cal and dig­i­tal are­nas for networking and ex­change of ideas and ex­pe­ri­ence. The com­pany re­cently hosted ‘Fu­ture Fit Boards’ in Sin­ga­pore, a round­table dis­cus­sion about gen­der di­ver­sity on boards.

“There is more fo­cus on cor­po­rate gov­er­nance and the pub­lic has new ex­pec­ta­tions to busi­ness con­duct, re­spon­sive­ness and re­spon­si­bil­ity. Board mem­bers, though in­signif­i­cant in num­ber, make very sig­nif­i­cant de­ci­sions on be­half of com­pa­nies, and these de­ci­sions af­fect not only the com­pa­nies and their em­ploy­ees and cus­tomers, but also so­ci­ety around them. So, more peo­ple should care about cor­po­rate gov­er­nance, about who are sit­ting on those boards, and what they con­trib­ute.” A new era in cor­po­rate gov­er­nance

Ac­cord­ing to Ms. Solvang, there are many rea­sons why both the busi­ness community and the gen­eral pub­lic are pay­ing more at­ten­tion to cor­po­rate gov­er­nance. “The de­bate about cor­po­rate gov­er­nance has been on-go­ing for a long time, and was ac­cel­er­ated and put to the fore by the fi­nan­cial cri­sis in 2008. Peo­ple started to ques­tion what was hap­pen­ing in the board­rooms of cer­tain com­pa­nies, ques­tion­ing the de­ci­sions they were mak­ing,” Ms. Solvang ex­plains. “Then there is dig­i­tal­i­sa­tion, which is driv­ing trans­parency. So not only are peo­ple more in­formed and can make in­formed de­ci­sions, they can also spread in­for­ma­tion wider and more quickly. Take, for ex­am­ple, the highly pub­li­cised ex­am­ples of what can hap­pen when cor­po­rate gov­er­nance goes wrong – such as Volk­swa­gen’s diesel­gate or the re­cent cor­rup­tion scan­dals in Brazil. Good cor­po­rate gov­er­nance can help en­sure that your com­pany is sus­tain­able, con­trib­utes to a sus­tain­able en­vi­ron­ment, and sur­vives over time, whereas bad or sloppy cor­po­rate gov­er­nance can put you out of busi­ness.”

A dy­namic con­cept

Not sur­pris­ingly, there is no sin­gle rule or set of guide­lines that de­ter­mines how com­pa­nies should con­duct them­selves. Dif­fer­ent coun­tries, in­sti­tu­tions, as­so­ci­a­tions and com­pa­nies all rely on dif­fer­ent mea­sures, which range from of­fi­cial reg­u­la­tions to mere guide­lines to help board mem­bers de­velop and im­ple­ment best prac­tices. One of the stan­dards that have had sig­nif­i­cant im­pact on the in­ter­na­tional busi­ness community over the past cou­ple of decades is the King Re­port on Cor­po­rate Gov­er­nance in South Africa. Its lat­est edi­tion, the The King IV Re­port, was pub­lished in Novem­ber 2016.

“The new King re­port sig­nals a ba­sic shift in cor­po­rate gov­er­nance to­wards a more stake­holder-in­clu­sive ap­proach, where com­pa­nies are seen, and see them­selves, as re­spon­si­ble con­trib­u­tors to the greater so­ci­ety. A con­crete ex­am­ple is the de­par­ture in re­port­ing from ‘com­ply or ex­plain’ – the prin­ci­ple on which most coun­tries’ cor­po­rate gov­er­nance codes are based – to a new ‘ ap­ply and ex­plain’ ap­proach. Rather than the ‘tick­ing boxes or list­ing ex­cep­tions’ ex­er­cise that many com­pa­nies base their cor­po­rate gov­er­nance re­port­ing on, we should de­fine and ap­ply prin­ci­ples of cor­po­rate gov­er­nance of rel­e­vance for our com­pany, and then hold our­selves ac­count­able and re­port against that stan­dard. This will make re­port­ing more in­te­grated, more mean­ing­ful, and more use­ful for the com­pany,” says Ms. Solvang.

In­vestors also have a role to play in push­ing for bet­ter cor­po­rate gov­er­nance, ex­plains Ms. Solvang: “In­sti­tu­tional in­vestors es­pe­cially, such as pen­sion funds, with enor­mous amounts of money, are in the mar­ket for long-term re­turns, so when they are assessing in­vest­ments, they need to con­sider which cri­te­ria can best en­sure long-term sta­bil­ity and sus­tain­abil­ity in those com­pa­nies. In­vestors can hugely in­flu­ence cor­po­rate gov­er­nance and which way the board is steer­ing a com­pany. For ex­am­ple, if in­vest­ments funds de­cide to pull their in­vest­ment out be­cause the com­pany acts con­tra­dic­tory to spe­cific val­ues, it can gravely im­pact on the com­pany in ques­tion.” Women on boards: To reg­u­late or not

When it comes to cor­po­rate gov­er­nance, few top­ics are as hotly de­bated as the ques­tion about gen­der di­ver­sity on boards. At the re­cent ‘Fu­ture Fit Boards’ event, ex­pe­ri­enced board mem­bers, busi­ness lead­ers, ad­vo­cates and aca­demics came to­gether to help com­pa­nies im­prove the gen­der bal­ance on cor­po­rate boards in Sin­ga­pore, where, in spite of some progress, the pace of change has been slow. Whereas Nor­way in­tro­duced a 40 per­cent quota more than a decade ago, Sin­ga­pore cur­rently has 9.7 per­cent women board di­rec­tors.

Many coun­tries have since taken this ex­am­ple on board: Ac­cord­ing to a re­port from Cor­po­rate Women Di­rec­tors In­ter­na­tional, 22 economies glob­ally have in­tro­duced gen­der quota leg­is­la­tion or man­dates, but they have cho­sen dif­fer­ent ap­proaches. Fol­low­ing a rel­a­tively suc­cess­ful UK ini­tia­tive, Sin­ga­pore has opted for tar­gets over quo­tas.

The Di­ver­sity Ac­tion Com­mit­tee (DAC) re­cently called on the mar­ket to adopt a three-tier tar­get of 20 per­cent women on the boards of the 100 largest listed com­pa­nies in the city state by 2020, fol­lowed by 25 per­cent in 2025 and 30 per­cent in 2030 for all STXlisted com­pa­nies. The call was echoed by Min­is­ter for Cul­ture, Community and Youth, Grace Fu, who is push­ing for the Mon­e­tary Author­ity of Sin­ga­pore to adopt a tar­get of at least 20 per­cent women on boards by 2020.

The sug­ges­tion has been met with crit­i­cism, which was also the case when Nor­way in­tro­duced its tar­gets, re­calls Ms. Solvang: “When quo­tas were first an­nounced in Nor­way, busi­ness lead­ers and own­ers re­sponded with shock. In fact, Nor­way also started with tar­gets, but the tar­gets weren’t met. Some peo­ple are say­ing that 20 per­cent is not achiev­able by 2020, while oth­ers ar­gue that it is ab­so­lutely pos­si­ble. What is quite cer­tain is that it is not go­ing to hap­pen by it­self. There needs to be some ac­tion. In Nor­way, we reg­u­lated. And to­day, the law is gen­er­ally un­con­tro­ver­sial.”

“The ar­gu­ment in Sin­ga­pore, as it was in Nor­way, is that gov­ern­ment should not in­ter­fere in the run­ning of busi­nesses. But specif­i­cally with the is­sue of women on boards, it is again a wider so­ci­etal is­sue, be­cause it is about mak­ing use of the in­vest­ment so­ci­ety has made in the ed­u­ca­tion of women. It is about mak­ing use of the tal­ent pool,” she ex­plains. “In fact, re­search in­di­cates that com­pa­nies with women on their boards do bet­ter, though it may also be that these com­pa­nies are gen­er­ally more pro­gres­sive and dy­namic. But chicken or egg aside – we could do worse than em­u­lat­ing the prac­tices of pro­gres­sive and dy­namic com­pa­nies,” says Ms. Solvang.

PHOTO: FU­TUREBOARDS

Up­per Left, Ms Turid Solvang, CEO of Fu­tureBoards ad­dresses the sev­enth Gov­er­nance Week in Sin­ga­pore in 2016. Above: Women are in­creas­ingly tak­ing the lead of or­gan­i­sa­tions

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