Rethinking governance: what should companies be responsible for?

It is time that we looked at the basic question of what should companies be responsible for, writes Jo Iwasaki.

The global financial crisis impacted not just on the economy, it intensified the challenges on corporate culture more broadly. Remuneration, short-termism, engagement with shareholders and, alongside these the business agenda and cultural issues such as diversity now form the core of the corporate governance debate.

All these issues highlight how companies are run. One might say that these issues have always existed. However, we have taken advantage of the current interest and explored whether the existing models of running companies need a major rethink.

Corporate governance looks at much more than board procedures and regulatory compliance. As recent business issues and controversies have demonstrated, shareholders, government, and the broader public are all interested in how companies respond to the changing business and social environment. The nature of the capital markets has changed so much it has influenced our thinking around the relationships between companies, boards and shareholders.

It is time that we looked at the basic question of what should companies be responsible for. Responsibilities need not be seen as onerous they prompt us to be alert to diverse interests that surround and affect businesses today. With a keener awareness of their surroundings and the willingness to respond, companies can be better prepared to identify where new opportunities are.

In recent ICAEW paper 'What are companies responsible for' we discuss four key responsibilities of companies. They are not a definitive or exclusive list, but we have dared to present them as a basis to prompt debate.

Achieving a business purpose

A company needs to have a business purpose that is easy to understand. As well as shareholders, everyone involved in a company, including employees, customers, suppliers and lenders, expect companies to generate continuing profits. However, maximising profit is not the only business purpose of a company.

A business should not be so focused on a specific purpose that it ignores changes in its environment. Innovation and adaptability are essential for a business to be viable over a corporate life.

Behaving in a socially acceptable way

Without being written down, social norms are there to set boundaries for what is acceptable as business culture and behaviour, in the societies where the company operates. Companies may need to, in some cases, actively go the extra mile to identify what is socially acceptable. This would certainly cost time and resources.

Companies also need to recognise that different communities (e.g. the financial services sector, or a particular industry) develop their own norms and these may be very different from those prevalent in a wider society.  This gap may suddenly become apparent when their values are subject to external scrutiny.

Meeting legal and regulatory requirements

Legal and regulatory requirements relate to issues such as employment, health and safety, anti-corruption and taxation for example and private contractual, legal and financial obligations such as company pensions and debt covenants.

Being based on law, these are mostly public, and understood by most people. Breaches of these requirements may lead not only to formal sanctions and litigation but more importantly, reputational damage.

Stating how their responsibilities are met

Companies are expected to acknowledge their responsibilities, provide information on how they meet them and be accountable. This is about acknowledging those responsibilities publicly, reporting on how they are discharged, and being answerable for consequences. It helps companies construct a robust foundation for building and maintaining trust.

If companies are fully aware of the range of their responsibilities and attempt to meet them, legislators and regulators can focus on developing codes and practices that are proportionate. This is a big 'if' and to imagine such change to happen instantly is naïve. However, without a change in how we think, the effectiveness of laws and regulations would be limited. Only when companies embrace the principles which are underlying laws and regulations, will we see corporate behaviour change. And an end to the rather cynical box-ticking culture at present.

Jo Iwasaki is Head of Corporate Governance at ICAEW 

A statue of a dragon marks the boundary of the City of London. Photograph: Getty Images

Jo Iwasaki is Head of Corporate Governance at ICAEW.

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A new German law wants to force mothers to reveal their child’s biological father

The so-called “milkmen’s kids law” would seek protection for men who feel they have been duped into raising children they believe are not biologically theirs – at the expense of women’s rights.

The German press call them “Kuckuckskinder”, which translates literally as “cuckoo children” – parasite offspring being raised by an unsuspecting innocent, alien creatures growing fat at the expense of the host species’ own kind. The British press have opted for the more Benny Hill-esque “milkmen’s kids”, prompting images of bored Seventies housewives answering the door in negligées before inviting Robin Asquith lookalikes up to their suburban boudoirs. Nine months later their henpecked husbands are presented with bawling brats and the poor sods remain none the wiser.

Neither image is particularly flattering to the children involved, but then who cares about them? This is a story about men, women and the redressing of a legal – or is it biological? – injustice. The children are incidental.

This week German Justice Minister Heiko Maas introduced a proposal aimed at to providing greater legal protection for “Scheinväter” – men who are duped into raising children whom they falsely believe to be biologically theirs. This is in response to a 2015 case in which Germany’s highest court ruled that a woman who had told her ex-husband that her child may have been conceived with another man could not be compelled to name the latter. This would, the court decided, be an infringement of the woman’s right to privacy. Nonetheless, the decision was seen to highlight the need for further legislation to clarify and strengthen the position of the Scheinvater.

Maas’ proposal, announced on Monday, examines the problem carefully and sensitively before merrily throwing a woman’s right to privacy out of the window. It would compel a woman to name every man she had sexual intercourse with during the time when her child may have been conceived. She would only have the right to remain silent in cases should there be serious reasons for her not to name the biological father (it would be for the court to decide whether a woman’s reasons were serious enough). It is not yet clear what form of punishment a woman would face were she not to name names (I’m thinking a scarlet letter would be in keeping with the classy, retro “man who was present at the moment of conception” wording). In cases where it did transpire that another man was a child’s biological father, he would be obliged to pay compensation to the man “duped” into supporting the child for up to two years.

It is not clear what happens thereafter. Perhaps the two men shake hands, pat each other on the back, maybe even share a beer or two. It is, after all, a kind of gentlemen’s agreement, a transaction which takes place over the heads of both mother and child once the latter’s paternity has been established. The “true” father compensates the “false” one for having maintained his property in his absence. In some cases there may be bitterness and resentment but perhaps in others one will witness a kind of honourable partnership. You can’t trust women, but DNA tests, money and your fellow man won’t let you down.

Even if it achieves nothing else, this proposal brings us right back to the heart of what patriarchy is all about: paternity and ownership. In April this year a German court ruled that men cannot be forced to take paternity tests by children who suspect them of being their fathers. It has to be their decision. Women, meanwhile, can only access abortion on demand in the first trimester of pregnancy, and even then counselling is mandatory (thereafter the approval of two doctors is required, similar to in the UK). One class of people can be forced to gestate and give birth; another can’t even be forced to take a DNA test. One class of people can be compelled to name any man whose sperm may have ventured beyond their cervix; another is allowed to have a body whose business is entirely its own. And yes, one can argue that forcing men to pay money for the raising of children evens up the score. Men have always argued that, but they’re wrong.

Individual men (sometimes) pay for the raising of individual children because the system we call patriarchy has chosen to make fatherhood about individual ownership. Women have little choice but to go along with this as long as men exploit our labour, restrict our access to material resources and threaten us with violence. We live in a world in which it is almost universally assumed that women “owe” individual men the reassurance that it was their precious sperm that impregnated us, lest we put ourselves and our offspring at risk of poverty and isolation. Rarely do any of us dare to protest. We pretend it is a fair deal, even that reproductive differences barely affect our lives at all. But the sex binary – the fact that sperm is not egg and egg is not sperm – affects all of us.

The original 2015 ruling got it right. The male demand for reassurance regarding paternity is an infringement of a woman’s right to privacy. Moreover, it is important to see this in the context of all the other ways in which men have sought to limit women’s sexual activity, freedom of movement and financial independence in order to ensure that children are truly “theirs”.  Anxiety over paternity is fundamentally linked to anxiety over female sexuality and women’s access to public space. Yet unless all women are kept under lock and key at all times, men will never, ever have the reassurance they crave. Even then, the abstract knowledge that you are the only person to have had the opportunity to impregnate a particular woman cannot rival the physical knowledge of gestation.

We have had millennia of pandering to men’s existential anxieties and treating all matters related to human reproduction, from sex to childbirth, as exceptional cases meaning women cannot have full human rights. Isn’t it about time we tried something new? How about understanding fatherhood not as winning gold in an Olympic sperm race, but as a contract endlessly renewed?

What each of us receives when a child is born is not a biological entity to do with as we choose. It is a relationship, with all of its complexities and risks. It is something worth contributing to and fighting for. Truly, if a man cannot understand that, then any money wasted on a Kuckuckskind – a living, breathing child he could get to know – has got to be the least of his worries. 

Glosswitch is a feminist mother of three who works in publishing.