Editorial

Citation

Kakabadse, N. and Kakabadse, A. (2008), "Editorial", Corporate Governance, Vol. 8 No. 1. https://doi.org/10.1108/cg.2008.26808aaa.001

Editorial

Governance, corporate social responsibility (CSR) and sustainability are headline news. No wonder! According to the International Labour Organisation (ILO, 2005) at least 12.3 million people are the victim of forced labour worldwide, of which 2.4 million arise out of human trafficking. Further, out of a total of 3.2 billion people, 2.6 billion are living on less than $2 a day, of which 1 billion live on less than $1 a day (World Bank, 2007). Moreover, the Global Ecosystem Assessment Report (UN, 2005) shows that approximately 60 per cent of ecosystem standards in terms of fresh water, fisheries, air and water purification and regulation of local and regional climate, natural hazards and pests, are being degraded or used unsuitably.

The idea of finding the North-West Passage, first conceived in 1493, became a reality on 21 August 2007, when the ice level in the Arctic dropped to only 1.6 square miles, allowing ships not equipped with icebreakers to sail through these challenging waters untroubled (Connor, 2007). The reaction of nations was joy, for what followed was a clamour to claim ownership of the Arctic and the minerals of its seabed rather than concern themselves with mitigating the consequences of looming cataclysmic disasters (Connor, 2007). Moreover, the two 2007 summits on global warming (both the UN and the US President’s summits) highlighted the growing gap over what needs to be done, the costs involved and what is actually happening (The Economist, 2007b). Not even discussed is that pollutants, such as polychlorinated biphenyls (PCBs) produced in the industrialised world and then carried north by winds and ocean currents to the Artic have endangered the Artic communities of Greenland and Eastern Russia (The Week, 2007). While PCB’s are known to cause cancer in animals and disrupt their nervous system, in humans they act as endocrine disrupters, mimicking human hormones and affect the gender of the foetus in the early stages of pregnancy (The Week, 2007). In one area, Chukotka, where mothers have, on average, two to four micrograms of PCBs (or even more) per litre of blood, they give birth to two girls for every one boy. A female population is being inadvertently created (The Week, 2007).

The media are silent. Such matters are not being communicated. One of the reasons for the deafening silence is that the goals of the commercial media are aligned with those of business and politics.

So, who speaks out? What of our leaders, or what people in southern France term les bonshommes (good men), those who set standards for others to follow, those men not afraid to pursue their beliefs?

We, the editors, conducted a seven year study of boardroom directors, leaders who influence social responsibility and sustainability policies at board level (Kakabadse and Kakabadse, 2007). Our global study stretching across 440 boards identifies only a small minority who are concerned with behaviour beyond that of achieving stakeholder value.

The majority of study participants focused on “business performance and profit” poignantly captured by a CEO of a “Carbon Forum” enterprise:

… the main reason that climate change is a boardroom issue is the companies concerned with how the environment and its attendant stakeholders affect business rather than how business affects the environment … The CEO is only interested in knowing that there’s a market for his emission assets and he doesn’t care about the intangibles except on his balance sheet. Unfortunately, the experts on this are in the carbon market and they are doing-very-nicely-thank-you.

That view represents the majority of board directors interviewed. The rules that are observed are those set by stock exchanges, corporate governance codes or legislation but nothing more!

Aligned with majority opinion in our study is another group, equally focused on business and profit but deeply conscious of reputational risk! One chairman in particular captured the sentiments of the group:

The reality is that success is increasingly dependent on the CEOs capacity to identify and manage risk. Success may not be achieved by putting delighted customers at the core of the business. That is taken for granted. Rather you need to do more in order to build or preserve a brand. For example, climate change is becoming a big issue. So you have to be on the right side of that too.

Then came a third group, an even smaller minority of participants driven by moral and social issues. Their views are captured by one non-executive director:

Business acumen is taken for granted, but to be truly successful you need to have a good moral compass and an advanced level of emotional intelligence. It is how you conduct yourself and how you set values and example for others that differentiates you from your competitors. Only companies with strong moral infrastructure are able to show sustainable success.

Thus, despite the current vogue of CSR consciousness and sustainability, leaders of business are as much focused on shareholder value as ever! So what of the counter balance, government, the media and the internet? Do they set the challenge?

In our postmodern era, a common assumption is that government set rules and standards for corporations to observe (Putnam, 1993). Reality is somewhat different. The responsibilities of government, private sector and NGOs are not clearly demarcated. In fact, government is increasingly being accused of absolving its responsibilities. In fact, the only clear line of separation, in practical terms, is the rule of law. As long as the law is observed, then all is ok. In the words of one CEO:

There is no formula for decision making but there is the law. I make sure the law is not broken. From there on in, there are only guidelines and these are clear, make profit for shareholders. That is my job and that is what I do. Sometimes I make good decisions and sometimes not so good but on balance I must make more good decisions than not. I am still in the job.

Therefore, what of the media and the press? What about the “watchdog” role, that of biting the ankles of private sector and government (Djankov et al., 2003; Cook, 2005)? The press and media, as much as any other collective enterprise has been exposed to the rigours of shareholder value. Both the press and the media are increasingly falling into the hands of ever fewer interests. Thus, few but select and elite dominant groups drive through critical messages, persuading the public to both accept and be compliant to current circumstances. In Italy, for example, 82 per cent of Italians depend on television for news (Norris, 2000), principally through companies controlled by the family of the former Italian Prime Minister, Silvio Berlusconi. The Berlusconi empire dominates Italian commercial TV and other media (Ginsborg, 2004; Stille, 2006). In the UK, three television groups control 91 per cent of the market followed by 81 per cent in France and 91 per cent in Germany (The Economist, 2007a). High concentration of ownership of the media is also evident in the USA, Canada and Australia.

A new level of economic and political influence, pushing right wing agendas while driving through profit, remains unaccountable. For example, in evidence given to the Commons Communications Committee behind closed doors on 17 September 2007 in New York, during its visit to the USA as part of its inquiry into media ownership, Rupert Murdoch “admitted he has ‘editorial control’ over which party his red-top papers, the Sun and News of the World, back in a general election and what line they take on Europe” (Woodcock, 2007, p. 1). It is truly worrying that global commercial media has enormous power, displaying no respect for tradition or custom that it seems to stand in the way of profit. Dismantling the concentration of ownership and control of the press and media cannot be achieved by new norms and ethical rulings. New regulation is desperately required from government that has the courage to stand apart.

Even more worrying is the integration of politics, military and the press. The integration goes beyond US and allied forces “imbedding reporting” in war zones, and extends to a growing link between the media and missile and military ownership. For example, the French Lagerdere Group, owners of Le Journal du Dimanche, Paris Match and radio station, Europe 1, also have substantial shares in the aerospace group EADS (The Economist, 2007a). The Dassauelt Group, whose aviation division manufactures Mirage fighters, owns 87 per cent of Socpress, in whose portfolio sits Le Figaro and many other regional titles (The Economist, 2007a).

So, where is the counter balance? Where is the challenge to determined vested interests? Have we lost our way in the unthinking search for profit which benefits the few, just us our eighteenth and nineteenth century fore fathers fell for the slogans of king and country. Then, many ordinary men and women gave their lives for a ruling elite that hid behind nationalism as a way of preserving their wealth. So where are the few good men, or as the French market would have it, les bonshommes, who can stand up and speak out?

Sustainable societies of the past built into their governance infrastructure safeguards preventing one or more vested interest dominating the potential agendas of the day. The democratic balance and counter balance of the ancient Athenians even went as far as ensuring how voting in the elected chamber was to be conducted. In Jewish antiquity, the three stalwarts of society, the Tsaddik (the righteous man), the Hasid (the pious man) and the Talmid Hakham (the scholar of sacred texts) required the Mochiach (the preacher of morals or the narrator) to stand above all others, including the righteous, the pious and the scholarly, and challenge current assumptions and practices.

So, we either have rules, or we have a narrator, or both. Interestingly, the embedded role of narrator has historically provided for the lengthiest of society survival.

The role of the moral narrator in modern times is supposedly exercised by an independent press, or “the Fourth Estate” as Thomas Carlyle (1840) observed in the nineteenth century. Understandably, a number of scholars have argued for the importance of a free press (Norris and Zinnbauer, 2002; Kakabadse et al., 2003; Kakabadse and Kakabadse, 2007) and warned of the dangers of concentrating resources in the hands of few. But to little effect!

Thus, what is the alternative to the press? In post modern times, the internet exemplified by various blogs, diaries and commentaries, has attracted the attention and interests of many, but has not stood up to fulfil the role of ethical narrator. What the internet has done is offer ill organised information and angry comment.

Thus, we are back to the press adopting its “watchdog” role as the institutional check on government activity (Donohue et al., 1995; Besley et al., 2001; Djankov et al., 2003; Cook, 2005). But the question that still perplexes us is how can a corporate structure which manufactures the Mirage fighter, and owns 87 per cent of Socpress, have Le Figaro as really independent (The Economist, 2007a)?

Therefore, we are left to wonder whether the few good men (Les bonshommes) of boards, those who hold a deep belief in CSR can, like their predecessors, the Mochiach, the ones whose unshakable beliefs led them to live dangerously, withstand their contemporaries’ disproval. Perhaps learning to live dangerously is the most salient characteristic of the contemporary leader. The consequences of not doing so will be felt by many years to come.

Nada Kakabadse and , Andrew Kakabadse