The need for good governance has been felt in what has traditionally been referred to as the Western world for a number of years, in the aftermath of the financial and economic crisis triggered with the collapse of the Lehman Brothers. The term ‘good governance’ tends to have different meanings for different countries as the issues involved tend to be varied.
Some even tend to limit the discussion on good governance to the public sector, in the belief that what the private sector does is nobody’s business. Such persons would be very averse to various forms of regulation and in fact have over the years lobbied hard against the introduction of laws that sought to control the banking sector.
I believe that the private sector has a need for good governance as much as the public sector does. Moreover, such good governance should not be limited just to the observance of laws and regulations. The minute we restrict good governance to this, the private sector would view such rules and regulations as getting in the way of making business and, as a result, would seek to circumvent them.
We need to extend the issue of governance in the private sector to take into account the need to serve the common good. Hence the title of this week’s contribution – solidarity in business decisions. If we make it a point to serve the common good in our business decisions, observance of the rules would not be so cumbersome.
Business decisions are made by human beings who operate in a network of relations in a society. I accept that we all have a need for individual satisfaction and such a need drives business decisions, just as it drives other decisions.
On the other hand, the fact that such decisions have an impact on society as a whole and on individual people, business decisions must take into account the value of the human person and, therefore, the common good. Business decisions that serve the common good are founded on good governance.
What does this mean in practice? There are three aspects that bring to life this concept.
Good governance should not be limited just to the observance of laws and regulations
First, there needs to be a link between rights and entitlements. A great deal is said (and rightly so) on the need to disincentivise reliance on social welfare. The most vulnerable in society need to be helped but should also be continually encouraged to make their own contributions. However, we need to take this point further. Fraud benefit is wrong but so is tax evasion.
Probably more resources are lost because of tax evasion than because of fraud benefit. So while the business sector needs to have its rights protected, it must also live up fully to its responsibilities. And one way of doing that is paying all the tax due.
The second point is a change in the managerial culture. Some businesses are still run on the premise that the manager/owner is the absolute master of the business. The management of an enterprise has the responsibility to lead and set the example; but it must appreciate that the enterprise must have a culture of service to society, which it must apply in the various decision-making processes. So it needs to take it into account when developing new products, in designing its human resources policies, in its investment strategy, etc. There is a human being at the start and at the end of every business transaction and so the bottom line cannot be financial in nature but the human person.
The third aspect is management education. It is useless to speak about changing a management culture if we do not change the way business managers, in their various hues and in their various specialisations, are formed. We can no longer transmit to young people a value-free framework for doing business, but it needs to be enriched with ethical reflection.
Although it is recognised that a market economy has proved itself to be the most successful model for creating wealth, a value-free framework for the market economy has meant that the model is being used for purposes which are intrinsically wrong such as child trafficking.
The business sector generates its profit from society and as such cannot ignore the bond that there should be among people. This is why solidarity in business decisions is not an option but a must, and it makes good governance an automatic consequence.