Business Ethics in Emerging Markets and Investors’ Expectations Standards

George Dallas is Director of Corporate Governance at F&C Investments. This post is based on an article by Mr. Dallas that first appeared in the International Corporate Governance Network’s 2012 Yearbook.

Ethics is in origin the art of recommending to others the sacrifices required for cooperation with oneself.” Bertrand Russell

Since the publication of its Statement and Guidance on Anti-Corruption Practices in 2009, the ICGN has actively advocated the fight against bribery and corruption as a fundamental component of the corporate governance agenda. The Statement and Guidance takes a global perspective, making clear that anticorruption is a priority in all markets.

But is it appropriate to set the same standards for anticorruption in all jurisdictions, particularly in emerging markets, where many underlying conditions are different and where bribery and corruption are particularly acute in both the public and private sectors? This was the question posed as the main discussion point at ICGN’s “Town Hall” meeting on business ethics in its June 2012 conference in Rio de Janeiro. Meeting participants, from a range of developed and emerging markets, expressed a resounding consensus that investors should not compromise their standards on anticorruption in emerging markets, even if corruption may be a more deep-rooted problem. However, while absolute standards on anticorruption should remain undiluted — beginning with a “zero tolerance” position — there may be different anticorruption strategies to apply in emerging markets, reflecting economic, cultural and legal differences.


International Corporate Governance Network Honors Bebchuk

Last week, at the 2011 annual meeting held in Paris of the International Corporate Governance Network (ICGN), Professor Lucian Bebchuk received an ICGN award for excellence in corporate governance. ICGN awards are given annually in recognition of “exceptional achievements in the corporate governance field.”

According to the remarks delivered at the ceremony by the chair of the ICGN awards committee Richard Bennett, Bebchuk received the award “for the volume and quality of his research, particularly around executive compensation and the relationship of governance to value and firm performance. Over two decades this research has provided a base of integrity and learning for scholars, policy makers, and legislators.” Quoting a letter from Robert Monks, Bennett added that Bebchuk “is the epitome of honest, painstaking, unprejudiced analysis; he is in truth an academic icon” and that “[a]ll of us are in his debt.”

The ICGN is a global membership organization of over 500 leaders in corporate governance based in 50 countries. Information about the ICGN awards, and about the past recipients of such awards, is available here.

Disclosure of Corporate Political Spending a Needed First Step

George Dallas is Director of Corporate Governance at F&C Management Ltd. and chair of the Business Ethics Committee at the International Corporate Governance Network. This post is based on an ICGN comment letter by Mr. Dallas and Christianna Wood submitted to the SEC, available here. The petition that is referenced in the comment letter is available on the SEC website here, and a post by Lucian Bebchuk and Robert Jackson, co-chairs of the committee submitting the petition, is available here.

The International Corporate Governance Network (ICGN) would like to voice its support for the recent petition that was sent to the Securities and Exchange Commission on August 3, 2011 by the Committee on Disclosure of Corporate Political Spending, advocating a rulemaking project to require disclosure of corporate political spending to public company shareholders. The ICGN concurs with this group of academic experts in corporate and securities law that more robust disclosure of corporate political spending is of interest to investors. While the ICGN’s purview is a global one, we believe this matter is particularly relevant in the United States given last year’s Supreme Court decision in Citizens United v. FEC, which confirmed the rights of U.S. companies to provide funding for political purposes.

The ICGN recognises that corporate political activity can be positive. However when corporate resources are deployed to seek political influence there is also potential for abuse. In the extreme this can lead to serious breaches of business ethics, particularly when influence is sought through corrupt practices or in ways that are not consistent with promoting the long-term interests of the company and its investors.


Lucian Bebchuk’s Keynote Speech at the ICGN Annual Meeting

Lucian Bebchuk delivered a keynote address at the annual meeting of the International Corporate Governance Network (ICGN) taking place this month in Toronto, Canada. The meeting drew over 400 participants from 40 countries. Bebchuk’s speech focused on reforming executive pay structures to tighten the link between pay and long-term performance. The address built on three research studies issued by the Harvard Law School Program on Corporate Governance:

Bebchuk’s presentation slides are available here.

Next Tuesday, June 15, Bebchuk will discuss the above studies in a webinar sponsored by the IRRC Institute. Registration for the webinar is free and can be done here.