Ethical Performance
inside intelligence for responsible business


looking to the future

June 1999

In June the Company Law Review steering group begins the next stage of its deliberations on how the balance of power between shareholders and stakeholders should be changed. Meanwhile, European companies are finding they are having to pay closer attention to corporate governance, the European Commission is inching towards a legally binding code for multinationals operating in the third world, and a new survey shows that the overwhelming majority of FTSE 100 companies now issue a social report of some kind.

It is possible to argue that all this activity doesn’t add up to very much. After all, the Company Law Review may decide that no changes are needed in the balance between shareholder and stakeholder power, and many corporate social reports lack detail, substance and a clear methodology.

Yet taken together, these developments, along with the Turnbull committee’s work on risk reporting, signal a sea change in the way companies will be expected to conduct business in future. The trend is clear: ethical performance is an increasingly important issue for companies, even if most are as yet undecided what to do about it.

In the late 1980s, a welter of reports on the impact of companies on the environment was a necessary prelude for regulators and companies to address the issue. A similar, if more muted, pattern seems to be repeating itself.

Corporate ethical performance impacts on many different departments – investor relations, environment, risk management, public affairs, government relations, and of course communications. The report by Pensions and Investment Research Consultants which we cover in our lead story of this issue notes that at present corporate responsibility is often the preserve of companies’ charitable donations committees. It will be interesting to see in, say, two years’ time, how many companies continue to believe their corporate ethical performance is best left in the hands of a committee chiefly responsible for overseeing charitable works.

Alistair Townley


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