The current crisis in corporate governance has involved only a small minority of companies, but it has damaged trust in the entire corporate world.
The polls show the extent of the damage. Over two thirds of Americans think senior executives are becoming less trustworthy.1 Over a third now regard big business as the biggest threat to the future of the country.2 Market confidence has been battered, and shareholders have suffered.
Restoring trust
Restoring trust must therefore be the top priority for major businesses. And not only must we rebuild the confidence that has been lost, we must go on to demonstrate that business can be a force for good and that the market economy is an engine of economic growth and social progress.
There are several stages in the restoration of trust. First there must be a framework of rules. The Sarbanes-Oxley legislation is providing welcome reforms in this regard. In Europe, many of the relevant issues, such as audit committee independence and internal controls, have been dealt with through regulation based on best practice. The patterns differ, but the objective is the same—to create credible rules that provide peace of mind for investors and public.
But external rules are only a beginning. They reassure people that business is under external constraints, but if we are to convince people that there exists a desire within business to behave with probity, companies themselves must take positive, visible action. A clean conscience cannot absolve us from the need to act. Not only must we know we are doing the right thing, we must show we are doing the right thing.
Corporate governance
This action begins with the mechanisms of corporate governance, ensuring that accountability is not only directed correctly—from board to shareholders, from executives to board—but that it is exercised effectively. Standards must be set by example from the top. Values must be identified—and implemented.
In BP, for example, we have identified four values—expressed in the words "performance-driven," "innovative," "progressive," and "green"—and our Helios Award scheme recognizes people who have demonstrated those values in action—who have "lived the brand."
Our actions then have to reach beyond the internal workings of the business and embrace the relationships that we form with customers, shareholders, suppliers, partners, governments, and communities.
Each of these relationships is under scrutiny. Are our dealings with governments above board? Are we too close to politicians? Are we reporting as fully as we can to investors?
Taking steps
The questions are fair ones—and in BP we have taken a series of steps to answer them.
To show that we do not tolerate corruption, we have banned all facilitation payments.
To show that we draw a clear line between the roles of politicians and business people, we have ended all political donations from corporate funds.
To show that we welcome scrutiny, we publish as much information as possible, whether about successes or setbacks.
A single theme and a single intention runs through these measures. The theme is transparency and the intention is to build trust. And in the wider context of corporate governance, transparency is the key to restoring trust—showing people that we have nothing to hide, and therefore they have nothing to fear.
References
- Harris Poll, July 2002.
- Gallup Poll, July 2002.
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"In the wider context of corporate governance, transparency is the key to restoring trust—showing people that we have nothing to hide, and therefore they have nothing to fear."
