Companies: cash cows or communities?

Quote

“I have found no greater satisfaction than achieving success through honest dealing and strict adherence to the view that, for you to gain, those you deal with should gain as well.” Alan Greenspan

News

The bank bonus scandal has been stirred up again this week, as the directors of Dutch bank ING backed down from paying executive bonuses for 2010 after public pressure from clients, MPs and trade unions.  Chief Executive Jan Hommen, who renounced his €1.25 million bonus, said ING had underestimated the negative public reaction.

A few weeks ago, the two British banks that have received the biggest bailouts – RBS and Lloyds TSB – announced “modest” bonus payments.  There is still strong public feeling against bankers’ bonuses in Britain, especially as the impact of government cuts, rising unemployment and lower real incomes begin to bite. 

However, protests have not had the same impact on board decisions as in Holland this week.  This might be a reflection of stronger social solidarity on the continent, and the tendency for companies to defer more readily to the state compared to Britain.

 

But it may also signal a shift in attitudes towards corporate governance; South Africa is leading the way in this respect, where a “stakeholder inclusive” approach is preferred over an “enlightened shareholder” focus regarding what is in the best interests of the company.

In Holland, four types of stakeholders in ING voiced their opposition to the decision by directors and shareholders: employees (via their unions), customers, government and taxpayers who rescued the bank. 

Perhaps the winds are changing towards recognising the broader, long-term interests of all stakeholders and not just the narrow, short-term, transient financial interests of its present shareholders.  This would move companies closer to what they actually are – a community of stakeholders, whose relationships together determine the long term financial, social and environmental impact of the company wherever it works.

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The ground-breaking proposals which launched South Africa into the forefront of corporate governance reform are laid out in the King III Report.  You can read a summary of the report here.

Walk the talk

It can be easy to overlook the impact of our decisions on others who are lesser stakeholders – particularly if they are not party to any relevant discussions.  Are there any important decisions that you are taking at work, home, or in the community, which will have a significant indirect impact on others?  It may be worth including them in the stakeholders you consult.
 

The last word
From the Bible, Proverbs 15:31 “He who listens to a life-giving rebuke will be at home among the wise.”