In the rush to regulation that has followed corporate financial scandals, is there risk of overkill? That’s the concern emerging from recently released Economist Intelligence Unit white paper entitled “Corporate Governance: the new strategic imperative”.
The KPMG-sponsored paper is the result of surveying 115 senior executives worldwide on their corporate governance views and conducting in-depth interviews with leading corporate and regulatory figures.
Many executives are now worried the pendulum has swung too far and that hasty regulation and overly strict internal procedures will impair their ability to effectively run their businesses.
CEOs, says the paper, “have to bear in mind the potential trade-off between polishing the corporate reputation and delivering growth”.
Four main conclusions emerged from the paper:
1. Regulation is only partial answer to improved governance, and prime responsibility lies within the company rather than outside it.
2. While the design and implementation of corporate governance structures are important, instilling the right culture is essential. That is driven by senior management who must make sure board members are free to engage in open and meaningful debate.
3. There is an inherent tension between innovation and conservatism, governance and growth. While the optimists see corporate governance as benefit rather than burden, others believe it threatens corporate agility. number of executives felt merger and acquisition deals, for instance, would be negatively affected by longer due diligence processes.
4. Transparency about company’s governance policies is critical. As long as investors and shareholders get clear and accessible information, the market can make decisions based on that information. Problem: “too few companies are genuinely transparent”.
Not surprisingly, the paper found corporate governance had shot to the top of CEO agendas, 46 percent rating it amongst top three business priorities, and 14 percent giving it top billing.
