Directors stand accused

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By Sandra Burmeister, CEO of Amrop Landelahni

Too many directors of companies across the globe are guilty of corporate
governance failures and - in many cases - of corruption.

It is up to board directors to ensure corporate accountability, transparency and
probity.

Globally, there?s a desire for effective leadership. Authentic leadership is essential
for achieving any of society?s goals, whether in politics, business or community-
building.

The global corporate scandals of the past decades, from Enron in the early
2000s, through the banking crisis in 2008 to the Barclays interest rate-fixing disgrace
in July last year have highlighted the consequences of unethical leadership and poor
corporate governance.

Recently, South Africa has been hit by a damning revelation of widespread
corruption and collusion in the construction industry, and the multi-billion rand
collapse of South Africa?s biggest non-listed company, First Strut.

Corporate greed and corruption is an international phenomenon that - to a large
extent - is responsible for the current global financial turbulence. The scale of
corruption and its impact on ordinary citizens is unparalleled.

Transparency International?s annual survey of perceived levels of public sector
corruption paints a picture of the public sector in crisis around the globe. And the
private sector is a partner in crime. There is evidence of institutionalised, systemic
corruption with business buying political favours and politicians selling them.

We are arguably in the midst of one of the greatest transformations in human
history. Old centres of power are declining; technology is driving the rapid pace of
change. At this time of unrest, uncertainty and risk, basic models are failing. The
demand for ethical leaders - leaders to navigate through these challenging times has
never been higher.

There is increasing emphasis on strengthening the external governance
environment. Transparency International argues that its four governance principles of
transparency, accountability, integrity and citizen participation are rooted in human
rights. These principles are underpinned by multiple pieces of legislation in the
corporate world.

However, a recent Ernst and Young survey showed an increase in corrupt
behaviour in business. Just over 40% of board directors and senior managers were
aware of irregular financial reporting in their company. Increased competition and the
rapid rate of change lead to the dichotomy of agility versus good governance.

Author Bennett Freeman argues for sustainability as a broader concept than
governance, regarding it as proactive versus reactive. "A company?s job,' he says,
"isn?t just to make profit for stockholders, but to provide value for all its stakeholders
- community members, trade unions, the public at large. And the one shouldn?t come
at the expense of the other.'

Freeman believes ethics and business go hand-in-hand. "Business is a human
institution and treating people with respect, dignity and integrity applies as much in
business as in life,' he says.

Sustainability captures all the ideals you won?t find in governance frameworks
such as Sarbanes-Oxley in the USA and the Cadbury Report in the UK. King III in
South Africa is ahead of the game with its triple bottom-line approach.

In business, the board of directors sets the tone. Increased competitiveness
globally, along with economic uncertainty, massive technological advances and
stringent governance regulations, pose increased challenges for directors.

Best practice boards recognise the value of ethical leadership and the need to
take cognisance of a broad stakeholder base. Sound governance demands
committing to ethical behaviour throughout the organisation.

Innovation, integrity, emotional intelligence and consistent decision-making under
pressure are essential qualities of directors. These distinguish good leaders. The
calibre of leadership of the board is the key to meeting the organisation?s financial,
social and environmental goals, and achieving sustainable growth.

For more information visit
Amrop

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