A group of business and think tank leaders from all regions of the world gathered in New Delhi recently for a CIPE-sponsored strategic roundtable discussion on the value of corporate governance. With this session, entitled "Democracy and Market Institutions," CIPE "goes global" with its years of experience promoting corporate governance in Central and Eastern Europe. The CIPE roundtable was part of a February 14 - 17 conference, "Building a Worldwide Movement for Democracy," which was co-sponsored by the National Endowment for Democracy (NED), the Confederation of Indian Industry, and the Centre for Policy Research.
Corporate governance is steadily becoming a determining factor in investment decisions globally. Companies and countries that can provide a stable and transparent investment climate stand the best chance of attracting investment and ensuring success in the long run. Adopting recognized best practices in corporate governance is a key step in this direction. By practicing sound corporate governance, companies create safeguards against corruption and mismanagement, and ideals consistent with democracy are cultivated -- encouraging transparency, open management, equal access to information, and protection of minority shareholders' rights.
Corporate Governance: A CIPE Priority
CIPE views the promotion
of sound corporate governance as crucial to its overall strategy. The major
regional conference that convened in Bucharest, Romania, last fall became a
launching pad for CIPE's corporate governance initiatives. That conference,
entitled "The Role of the Corporation in Today's Society," focused on
corporate leadership and the role of the private sector in economic and social
development.
The roundtable in New Delhi assembled private sector leaders and thinkers to develop a grassroots strategy to identify best practices and promote responsible corporate governance.
Prior to the New Delhi roundtable, CIPE conducted a survey of select business associations and think tanks around the world to: 1) examine corporate governance practices in different countries and regions; 2) identify effective corporate governance strategies; and 3) explore how corporate governance is perceived in different parts of the world as a remedy for economic crises. The results of the survey provided a benchmark for discussion at the strategy session.
Building Democratic and
Market Institutions through Corporate Governance
The "Democracy and
Market Institutions" workshop focused on the role that corporate
governance plays in developing a global democratic movement.
Such governance is the organizational mechanism by which corporations ensure effective and accountable management. In his remarks at the conference, guest speaker Marek Hessel of Fordham University identified the connection between corporate governance and democracy in that both have four core values: 1) accountability; 2) fairness; 3) transparency; and 4) responsibility.
These four pillars are vital to the efforts of those working to bring about reform. The economic crisis in Asia, for example, has been described as a crisis of confidence in societal institutions caused by opaque decisionmaking processes and transactions made with little or no public scrutiny. At the workshop in India, there was general agreement that fair market systems cannot function, and the public cannot exercise its democratic rights, unless information affecting the public interest is made available. Thus, public disclosure and accountability are necessary.
Key Conclusions
There was general
agreement that corporate governance is a relatively new concept and is not
widely acknowledged or understood. Public education efforts are needed to
promote a better understanding of corporate governance principles and their
relationship to democratic development.
The group recognized that the private sector needs to mobilize to undertake voluntary reforms. Progressive business associations can play a key role by developing model codes of conduct, identifying best practices, and encouraging their members to adopt them.
To have effective corporate governance, companies need to have independent directors. A mechanism is needed to identify independent, non-executive company directors with a range of talents and experience, including women, who can bring diverse viewpoints to the policymaking process.
Finally, concerted efforts, particularly through effective legislation, are required to create open markets in place of crony capitalism. Such legislation includes requirements for internationally accepted accounting standards, standards of disclosure, reform of bankruptcy laws, anti-trust mechanisms, and prohibitions on insider trading and conflicts of interest.
Next Steps
The workshop identified
future steps for advancing good corporate governance in a number of countries.
Participants committed to undertake the following activities over the coming
year:
These will be disseminated both through print and electronic media (Internet and Web sites).
Dr. John Sullivan, CIPE's Executive Director, attended the workshop in New Delhi and described it as "an important step in CIPE's ongoing efforts to encourage economic and democratic reform." He notes, "CIPE has corporate governance programs in Bulgaria, Romania, Slovakia, Russia, Albania, and a regional program in Southeast Asia, and corporate governance will continue to be a top priority for CIPE."