Boards have a crucial role to play in setting the right ‘tone at the top’ if companies want to achieve long term sustainable success, the Chartered Institute of Management Accountants (CIMA) regional director Europe David Rowsby has said.
Speaking at the annual parliamentary reception of Tomorrow’s Company, a think tank that studies good corporate governance, Rowsby said yesterday that boards should set the right ethical culture to make companies a real "force for good".
"We believe business can and should create value by aligning economic imperatives with social and environmental drivers. This triple context frames the operating environment for companies where business success and sustainability are mutually reinforcing," Rowsby said.
CIMA is engaged in a number of activities with Tomorrow’s Company, including the think tank’s good governance forum, which explores what good governance means and makes practical recommendations to company boards and policy makers on the subject.
"This year the forum is focusing on boards and risk. A key risk is an inadequate ethos and culture. Boards need to understand not just the hard risks, such as IT failures, but also how the wrong culture can spell trouble for a company," Rowsby said.
Building on that point, Rowsby said a recent CIMA survey found that reputational risk is a growing concern among finance leaders, revealing that three quarters of global surveyed companies are prepared to lose profit in the short term in order to protect their long term reputation.
The parliamentary reception was hosted by Lord Haskel who said that one of the House of Lords’ (HoL) tasks is to hold not only the government but also businesses to account.
Lord Haskel mentioned as examples the HoL’s commission on the banking industry and the inquiries on corporate taxation, railway fares, zero-hour contracts and energy prices.
"Certainly regulatory failures are partly responsible but so many are the recent examples of business people being greedy for themselves rather than ambitious for their companies," Lord Haskel said.
Lord Haskel added that the perceived wrongdoing in business has created an anti-business feeling, which according to him can only be corrected by changing values accordingly.
"I think that Tomorrow’s Company values are very relevant. Ethical training is one reaction to this public mistrust," Lord Haskel said.