Beneath the bottom line

The last decade started with a human, environmental, and financial catastrophe that literally spilled over from a short-sighted decision to cut costs. The BP Deepwater Horizon rig explosion in April 2010 discharged more than four million barrels of oil into the Gulf of Mexico, severely harming marine life and coastal communities living in the surrounding regions. The incident killed 11 employees on the spot and cost the British multinational upwards of $60 billion.

A US Government investigation traced the catastrophe back to poor safety standards driven by ‘systemic root causes’ bent on reducing corporate costs.

The oil spill was neither the first nor the last failure at corporate governance; from Lehman Brothers to Wirecard, and from FIFA to Cambridge Analytica, reputable organisations have repeatedly been caught red-handed engaging in corporate fraud, corruption, mismanagement, and other untoward behaviour.

But besides the devastating immediate impact to a company’s performance, to its brand equity and partnerships, bad corporate governance is a threat to democracy, too. The cogs and chains that allow an irresponsible business decision to grow into a massive disaster are fixed to the same mechanism that makes public life go round.

It is not unreasonable to argue that dozing watchdogs or toothless enforcement agencies germinate deficient corporate governance, but it is also true that the business community has a crucial part to play in making sure that institutions carry out their work diligently. In many areas, in fact, it is only the private sector that can bring about the needed reforms in the public sector. As the primary agents of economic activity and distribution of wealth, businesses are in a strong position to demand accountability, transparency, commitment and integrity of political leaders and the civil service

as well as of their employees and private citizens in general. But first, they must themselves deliver on their corporate values and nurture a culture of good governance.

Market systems are fundamental to the democratic infrastructure, and cracks in corporate governance quickly develop into the collapse of the social contract that ensures the fair and equal treatment of individuals. More dangerously, the democratic landscape of shared power becomes vulnerable to attacks when governance standards are ignored, ultimately undermining economic growth itself.

Good corporate governance is an investment in the public relationships that provide the context and opportunity for success. A sound governance strategy understands that the bottom line, actually, lies deeper than financial profits.