Governance: Past, present and future

I was recently invited by Bernard Kiragu, the director of corporate governance firm Scribe Services, to be a panellist at a breakfast meeting they were co-hosting with the South African FluidRock Governance Group.

Its theme was ‘Corporate Sustainability and Governance’, and the room was filled with experts in the field who were being given the opportunity to reflect on the past, the present and the future of the subject.

The first keynote speaker was Annamarie Van der Merwe, Fluidrock’s executive chair, and she took us through the evolution of how society believes businesses should behave. The baseline against which reactions emerged was provided by Milton Friedman, who in 1970 told us that “the business of business is business”, where the obligation of businesses was simply to provide maximum returns to shareholders.

She then drew attention to the governance guidelines described in the South African King Report of 1994, which emphasised the need for ethical leadership, sustainability and good corporate citizenship. This was reflected by Larry Fink, the CEO of investment management corporation Blackrock, in his 2018 open letter to fellow CEOs, in which he urged businesses to be driven by purpose.

They needed to be sustainable in the long term, he stated, including through taking care of their communities and of the environment, and through having the interests of all stakeholders, not just shareholders, in mind. Indeed in 2020 he announced that environmental sustainability would be a core criterion for future Blackstone investment decisions.

Another reference made by Mrs Van der Merwe was to Rebecca Henderson’s 2020 book, Reimagining Capitalism, which also had us be concerned about purpose—a higher purpose than mere profit maximisation. This led her to quoting a line that originated with Peter Drucker as far back as in 1954, when he stated that “Profit is like oxygen. You need it to survive, but if you think that oxygen is the purpose of your life then you’re missing something.”

As the Fluidrock chair followed this flow she kept reinforcing these points, worrying about the huge inequalities we are living with. Economic power is so concentrated in the top 100 firms, she told us, whose turnover is equivalent to the gross domestic product of 70 percent of the world’s countries. This has led to a decline of trust in both these and other companies and in governments, and a view that capitalism is the problem rather than the solution. So it makes sense to be a responsible corporate citizen, she insisted. There is no choice, she said, confirming that there is no “Planet B”.

Mrs Van de Merwe now provided a brief overview of the ISO 37000 guidelines to organisations and their governing bodies on how to perform with purpose and effectively, while behaving ethically and responsibly. This 2021 document applies to public and private, for-profit and not-for-profit, large and small entities, and it was produced with a universal perspective, she told us, while allowing for appropriate local adaptation. It enables everyone to speak the same language, and it therefore facilitates such initiatives as international trade and investment, and cross-border partnerships for climate change mitigation.

Do at least, as I have done, Google ISO37000, as you will find the write-ups easy to follow and to apply. Like everyone today, it emphasises the absolute need for a purpose and for values to inspire your organisation, with robust stakeholder engagement and a long-term perspective that promotes sustainability. Plus effective board oversight, including about risks, with transparency and accountability at all levels. As we frequently hear, the tone is set at the top, so it is the leadership that must act as role models for pursuing the purpose and for living the values.

This keynote address was followed by a second one, delivered by Dr Julius Kipng’etich, who spoke about a favourite theme of his—the role of the individual in all of this. The session ended with the panel discussion of which I was part, but there’s no more room for me to share any of that here, so you’ll have to wait two weeks till my next column to learn about it all.

Let me conclude on a very personal note. As I first saw Mrs Van der Merwe’s name it immediately reminded me of another Van der Merwe – Eric, with whom I participated in a student exchange programme back in 1962, 62 years ago. He stayed with me and my family in London for a few days, and I then stayed with him and his in Bruges, Belgium. As I mentioned this to Annamarie, she told me the origin of the name is from the Netherlands, and it means “From the River”, relating to someone who lived on the banks of the Merwede River there. The name was taken to South Africa by Boer settlers. I couldn’t resist squeezing in this story!