1. Changing Corporate Behaviour Ombudsman Association
Dr Jonathan Westrup
May 11th 2016

2. FOCUS upon THREE KEY THEMES
Regulation Governance “Creating Shared Value”

3. What corporate behaviour are we concerned about?

4. ENRON, RBS, LIBOR fixing, ANGLO IRISH BANK,
VOLKSWAGEN ………….

5. But what about the behaviours that allow for this?

6. And the impact that these companies are having upon our lives?

7. The relationship between society and business is complex and there is risk of unintended consequences

8. REGULATION

9. BUT CERTAIN BEHAVIOURS CONTINUE

10. Regulation has a vital role in ensuring appropriate corporate behaviour but has distinct limits

11. Governance?
“the system by which organisations are directed and controlled”

12. Challenge: Modern Corporation
Separate ownership and control
Management is separated from ownership and corporate control falls into the hands of managers (Berle & Means 1931)

13. CADBURY 1992 GREENBURY 1995 HAMPEL 1998 HIGGS 2003 WALKER 2009
CORPORATE GOVERNANCE emerges
CADBURY 1992
GREENBURY 1995
HAMPEL 1998
HIGGS 2003
WALKER 2009
DAVIES 2011

14. Corporate Governance Code
“Comply or Explain”

16. Who are the OWNERS?

17. What are they looking for?
SUPERIOR INVESTMENT RETURNS
HIGHLY COMPETITIVE MARKET
RETIREMENT/SAVINGS FUND

18. Government Pension Fund Global
“We have six strategic
focus areas for our ownership activities: 
Equal treatment of shareholders
Shareholder influence and board accountability
Well-functioning, legitimate and efficient markets
Children’s rights
Climate change risk management
Water management”
Government Pension Fund Global
$850 bn. in
assets

19. Council of Ethics
Determines which companies are excluded from the Fund:
Human rights:
Environmental record;
Unacceptable greenhouse gas emissions:
Produce tobacco
52 companies that have thermal coal as part of their activities excluded as of 1st of February 2016.

20. EXECUTIVE PAY Martin Winterkorn € 5.9m performance related pay in 2015
UK: CEO pay is now 183 times median salaries.
times
(Economic Policy Institute)

21. “Say on Pay” Culture Project Stewardship Code
Where next?
Stewardship Code
make shareholders be active and engage
in corporate governance
“Say on Pay”
Culture Project

22. Culture and behaviours

23. To SHAREHOLDERS according to Maximizing Shareholding Value
GOVERNANCE MODELS
“Does a business have responsibilities?” Milton Friedman
To SHAREHOLDERS according to Maximizing Shareholding Value
STEWARDSHIP
Similar but different emphasis
STAKEHOLDER
YES! To a wide range of different actors

24. “Create Shared Value” Porter and Kramer (2011)
“Companies: outdated approach to value creation”
“optimizing short term financial performance and ignoring broader influences”
“Reconceive products and markets
Redefine productivity in the value chain
Enable local cluster development

25. “Is our product good for our customers?
“It is not philanthropy but self interested behaviour to create economic value by creating societal value.”

26. Examples Energy use and Logistics Resource Use Procurement
Distribution
Employee productivity
Location

27. POLITICS

28. HOLLOWING OUT OF WORK (GRATTON 2014)

29. CORPORATE BEHAVIOUR?

30. Tectonic plates beginning to shift?
Regulation can only ever be a partial solution Corporate governance is evolving Culture of responsibility is required Shared value offers an opportunity

31. THANK YOU
@jgwestrup