Good governance, good for business

2002

The World Summit on Sustainable Development was held between 24th August and 4th September 2002 in Johannesburg. The main outputs of the event were the plan of implementation, signed by the negotiators of 191 countries, and over 300 partnerships forged between governments, business and NGOs.

The plan recommended action on, or made a commitment to, renewable energy, sustainable transport, health, water, housing and much more. Pretty much every issue can and will impact on corporate reputation over the coming years as consumers become savvier to the ‘world behind the product’.

If you are looking for one concern that will really cut the mustard with the board, however, you need to tell them that a commitment to corporate governance was on the menu. There are many definitions of corporate governance, but we find it helpful to consider the main strands to be financial integrity, transparency and accountability, leadership from the board and being the employer of choice. Put simply it’s the “way we do business”.

In the current marketplace where up to 85% of a company’s market value may be based on intangibles , have you put in place the governance structures that will safeguard your reputation and your brands? And can you afford to be left behind when visionary companies are doing so?

The benefits
You may be convinced, but what about your Financial Director? How do you persuade the purse strings holder to invest time and money in building trust and corporate reputation? You could start with some quotes and figures to make the benefits clear:

  • Investors are willing to pay up to 27% more for companies with good governance (McKinsey world-wide study)
  • 8-15% of a company’s share price can be ascribed to corporate reputation (Cooper 1999)
  • “The brand is the capitalised value of the trust between a consumer and the company” (Chartered Institute of Marketing)
      Visionary companies that put the culture in place to predict and respond to emerging risk to reputation also find it to be one of the most effective ways of identifying innovative opportunities – think of the rapidly growing market for fairly traded coffee that grew out of the backlash to coffee bean prices.

      How do I win trust and protect my organisation?
      You’ve got the go ahead from the board, where do you start? We recommend a ten-point action plan to build the trust on which your business relationships can be sustained, and so deliver competitive edge:

      1. Articulate a clear sense of purpose
      2. Create a workforce committed to the values of the organisation
      3. Define how we do things around here
      4. Manage the intangibles
      5. Put together a clear strategy for corporate responsibility
      6. Create a brand with personality
      7. List and involve people in strategic ways
      8. Manage risk
      9. Leverage social change
      10. Consider strategic involvement and investment in the community

      Some companies are participating in public private partnerships as a way to boost their corporate reputation. Article 13 are profiling five of these innovative partnerships in the September/October issue of www.article13.com.

      In conclusion
      Be wary of trying a superficial ‘quick fix’ as if you’re found out you’ll be worse off than when you started. We take the view that managing corporate reputation is all about putting the governance structures and culture in place to deliver the long-tern financial returns that a truly sustainable company requires.

      The World Summit served to underline that corporate governance is a trend that the most innovative and forward-looking companies are taking on board and integrating into business planning.

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