Natural Resources and Violent Conflict - WaterWiki.net

302 john braycomparative safety does not remove their exposure to the reputationalrisks of involvement with a controversial regime.Implications of Stock Exchange ListingShareholders demand transparency from listed companies so that theycan understand the potential risks to their investments. The overalltrend is toward higher standards on a wide range of corporate governanceissues—including open disclosure of the extra risks involved ininvesting in conflict regions or weak states.Corporate Codes and Stock Exchange Regulations. In the UnitedKingdom the directors of companies listed on the London Stock Exchangeare expected to comply with the risk guidelines outlined in the1999 Turnbull report, officially known as Internal Control: Guidancefor Directors on the Combined Code (Institute of Chartered Accountantsof England and Wales 1999). Turnbull is the latest in a series ofcorporate governance reports. Its objectives are, first, to ensure thatcompanies establish systems of internal control to assess and managerisks effectively and, second, to ensure that they publish regular reports.Similar guidelines have been issued in Canada, France, Germany,South Africa, and the United States. 10Turnbull does not encourage companies to avoid risks, but rather tounderstand what the risks involve, to manage them, and to give a publicaccount of how they have done so. The report specifically includesreputational risks such as a company might incur from investing in acountry with a poor human rights reputation. Again, it does not takeaview on whether companies should or should not operate in suchcountries. Rather, the report aims to ensure that companies assess riskssystematically, make appropriate choices in line with their overallstrategies, and explain those choices to investors.The Enron affair led to further pressure for corporate governancereforms on both sides of the Atlantic. The U.S. Sarbanes-Oxley Law,which was introduced as a result of the Enron scandal, imposes tightercorporate governance rules on all companies listed on U.S. stockexchanges, even if they are based outside the United States. The actrequires a company that issues quarterly and annual reports to the U.S.Securities and Exchange Commission to have its principal executiveand financial officers each certify financial and other information inthe reports. In a similar spirit, in the United Kingdom the Higgs report,published in January 2003, tightens the requirements on nonexecutivedirectors to ensure that they are actively engaged in monitoring theircompany’s activities (Higgs 2003).Commenting on the Enron affair, British Petroleum Chief ExecutiveLord Browne points out: “The current crisis in corporate governance