Let's Ensure A Positive "New Normal"

It has been a very interesting couple of weeks. It started on June 18th when the International Corporate Governance Network (ICGN) ran the first in a series of webinars titled “The Evolving Social Contract”. The title of the first webinar in the series was “Executive Pay: Reframing for the Long-Term”. The ICGN is led by investors responsible for assets under management in excess of $US 54 trillion and is a leading authority on global standards of corporate governance and investor stewardship.

During the event, the panellist spent over 5mins answering my questions: “Should companies be asked to be explicit about how they define their social contract? Should we have Social Contract Accounting to supplement the financial accounts, so companies can be held to account? And should CEO pay be related to social contract accounting?” In their replies, all the panellists answered yes to all three questions. For a full report on this see: Valueism and Social Contract Accounting Get the “Thumbs-Up”.

Valueism and Social Contract Accounting, two sides of the same coin, are what I think are needed to overcome what I regard as corporate governance and investment stewardship crises. I have written about this for my publication on Medium called On Boards.

There seems to be growing awareness of the problem and on the Institute of Directors (IoD) launch event inaugurating the Centre for Corporate Governance, “an independent body that will push for improved corporate governance across British boardrooms.” My understanding is that the initiative was instigated by Dr Roger Barker, Head of Corporate Governance at the IoD, and spearheaded by the IoD Chair, Charlotte Valeur, who was brought in to rejuvenate the IoD and ensure it is fit for the 21st Century following many years of falling membership. For full details see my report: IoD Centre of Corporate Governance Launch: Pushing for Improved Corporate Governance

Last night I published a long-read article that consolidates much of my research and thinking on the issues of governance and stewardship, where it went wrong and what needs to be done to fix it. In the 12hrs, overnight (UK) time, it was already read over 600 times and has provoked a good discussion and positive feedback. Overcoming the Dramatic Failure of Corporations by Addressing the Governance and Stewardship Crises.

During this past couple of weeks I have had some great conversations about the issues with the George Dallas Head of Policy for the ICGN, Charlotte Valuer Chair of the IoD, Colin Mayer, Peter Moores Professor at Sa?d Business School, Roger Martin, leading management thinker, senior advisor to A G Lafley at P&G, and former Dean of Rotman Business School.

From these and other conversations it is clear that the current crisis has created an opportunity for us to create a better “new normal” as we emerge from it. However, there is also the real possibility that solutions will continue to be sought in a highly fragmented way, as they have been in the decade since the last crisis. That would be a tragedy as it means progress is far too slow and impact is severely limited.

The complexity and confusion caused by the piecemeal approach also cause as many problems as they solve. So, now is the time for a multi-disciplinary approach to achieve some common understanding, consensus, and shared language about the way forward. I’m now in conversation with people from business, finance, economics, accounting, policymaking and other disciplines to try and establish the needed dialogue.

Let me finish on what I believe to be a very optimistic note. I have long argued “the shareholder versus stakeholder primacy argument is nonsense, based on a false dichotomy. No stakeholder group should have primacy. All parties with an interest in the long-term success of the business get maximum returns when the focus is maximising the long-term value of the business itself”.

In these past two weeks, every person I mentioned above has agreed with this. I, therefore, hope we can move beyond the polarising argument that gets us nowhere and make progress to where we all want to get to – a world in which business is focused on the creation of real value that generates healthy, long-lasting businesses and sustainable prosperity that is widely shared. Prosperity that is measured in terms of human flourishing and wellbeing, generated by flourishing businesses and economies.