I had the pleasure of taking part in the World Economic Forum series of interviews with CEOs from its PACI community, which aims to rebuild trust, transparency and integrity in business.
What does greater transparency and integrity mean in practice and how can this be achieved?
When principles such as transparency, integrity and accountability are not backed by actionable policies and procedures, they lose much of their meaning and most of their value. Only a strong governance framework can give an organisation and its stakeholders confidence that every dollar invested, and every hour being spent, is creating shared value and generating the right kind of impact.
That can mean many things in practice depending on the nature of the business and where it operates. Just as laws and regulations differ between markets, so do expectations, cultural norms and even the meaning of many governance-related terms. This is something we are very mindful of at the Pearl Initiative – a private sector initiative committed to promoting a culture of good corporate governance in the Gulf Region.
Rather than advocating a ‘cookie cutter’ approach for Middle Eastern companies, we are adamant that the most effective governance mechanisms are those that are tailored to the cultural nuances and practices of the region. That doesn’t mean lowering the bar in the slightest, but it means developing measurement, reporting and anti-corruption mechanisms that are compatible with a relationship-based culture and economies still largely dominated by state-owned enterprises and family businesses.
However, what’s more universal is the business case. Study after study shows that well-governed companies that embrace principles of transparency and integrity are more successful and sustainable over time. And that’s where we need to be focusing our efforts when we talk to companies about becoming more transparent and accountable.
Why is it important to move beyond compliance to rebuilding trust in business and institutions?
We all know how important trust is in our lives. We know that it is the lifeblood of positive and lasting relationships. It is no different for businesses in their relationships with their stakeholders. Just as governments have a social contract with their constituents, companies have an unwritten contract with their stakeholders, and the prize on offer is not just a social license to operate – it is true value creation.
When it comes to generating trust, compliance alone counts for little with the modern consumer. According to the 2016 Edelman Trust Barometer, an annual study measuring trust in different institutions, 80% of people believe that businesses can increase profits while improving economic and social conditions in the communities in which they operate. In fact, not only do they believe that this is possible, but this is what they expect businesses to be doing.
Trust helps companies generate value and resilience, enabling them to grow. Growing companies create more jobs, stimulate economic activity, and provide opportunities for entrepreneurs. All of this stimulates the economy as a better place in which to do business, creating a nucleus for foreign investment. Just as families are the building blocks of most stable societies, then transparent, accountable and trustworthy companies are the building blocks of most sustainable economies.
How important is setting the tone at the top for building a culture of integrity and trust in an organisation?
Leadership is critical and CEOs have a unique role to play. We have an immense influence on business culture through our words, actions, policies and decisions, and in many ways need to aspire to being the personification of transparency and accountability.
Diverse and well-functioning boards can also have a big impact on culture. Board composition alone – for example, including women, young people and professionals from a range of backgrounds – can have a major impact on the level of trust an organisation receives from its own employees and external stakeholders.
Ultimately, if board members and executive leaders are not held accountable for their own performance, values and decision-making, then why should anybody else be?
Of course, it cannot end there. Corporate culture might start at the top, but it must also filter down through all levels of the organisation. That means line managers, supervisors, contractors and even corporate trainers. And as always, these good intentions must be backed up with policies and procedures, including safeguards such as whistleblowing mechanisms that encourage employees to speak up about unethical practices regardless of their seniority. Rather than a set of values posted on a website or a book of rules on a shelf, good governance is a culture that needs to be cultivated internally, vigorously protected and visibly rewarded in order for it to take root and contribute to long-term value creation.