Responsible Business Guide: A Toolkit for Winning Companies

RBG
Responsible Business Guide: A Toolkit for Winning Companies
RBF Pillar 1: Governance and Management
Company governance and management is the face of a company. It is an outsider’s
window into how ethical and accountable a company’s behavior can be.
Decision-making and Values
The root words for governance and management mean “to steer” and “handle” respectively,
and spell out the job of a company’s decision-makers. These typically include proprietors,
directors, or managers. Whether a company is small or large, it operates on a system of
leadership and decision-making that allows for it to sell goods or services for a profit. All
company decisions must always be made to ensure profitability. But they must also be
implemented within bounds determined by the culture, tradition, or social values within
which the company operates.
Hence, while Governance, comprising the board of directors in larger companies or the
proprietors in smaller ones, provides the value framework for business decisions,
Management comprises individuals who must take these decisions at the operational level.
In smaller companies, these are often the same individuals, but increasingly, company
employees trained as managers are charged with implementing a company’s business
operations under guidance.
In my view, neither the fraud nor the discovery
of the fraud caused the downfall [but]... corporate
decisions — loading the company with debt, poor
acquisition decisions, also the Internet mania that
swept the country and the telecomm implosion
in general.
Cynthia Cooper
MCI-WorldCom whistleblower
A company’s decisions are deeply entwined
with its ethical values, which are reflected in
its public image. How companies are regarded
in public determines how much business they
can generate. When a company’s declared
values contradict its practices, catastrophic
consequences may follow.
MCI-WorldCom illustrates this well. When it filed for bankruptcy in 2002 it was more than
the biggest corporate collapse in U.S. history. It was an example of wayward governance
propelled by greed, where an overtly religious CEO attended church while senior managers
systematically abused the accounting system through fraudulent entries and loans, reflected
losses as investments, and lied to investors in collusion with accountants and stock-market
analysts.
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