An excessively legalistic approach, such as that which exists in the United States, can be detrimental to achieving high corporate governance standards, according to Roger Barker, head of corporate governance at the Institute of Directors of the UK.
Dr Barker, who will be giving a talk next week in Malta entitled “Setting and maintaining standards in corporate governance”, emphasised to The Times Business, however, that “law has a role to play in shaping a credible business environment”.
He said: “The most important aspects of good governance should be driven from within individual organisations, where they can be tailored to specific circumstances. Boards of directors are in a much better position than legislators to develop an appropriate governance framework for their enterprises. A regulatory-based approach will be, by necessity, ‘one size fits all’.”
Dr Barker will be addressing a seminar entitled “Powers, Functions, and Duties of Company Directors” at the MFSA in Mriehel next Thursday. The seminar is a joint initiative of the Malta Institute of Management and the Institute of Directors (Malta Branch) and is supported by the MFSA and the Phoenicia Hotel.
Dr Barker said corporate governance is about ensuring that an organisation remains true to its core objectives and achieves success on a sustainable basis. This, he stressed, is as important in today’s business world as ever.
“The challenges of the business and regulatory environment are growing rather than diminishing. Both commercial and non-commercial organisations are increasingly complex. In such a context, good corporate governance systems and processes – underpinned by a sound corporate culture – are an essential component of corporate success and citizenship,” he said.
Dr Barker said companies are nowadays much more aware of governance issues.
“The term ‘corporate governance’ has itself only been in common usage since the early 1980s, although the problems of governance have always been with us. And a series of major corporate scandals – including the recent financial crisis – have highlighted corporate governance in the eyes of both the business community and the general public.”
The challenge for the future, he pointed out, is to demonstrate that corporate governance is much more than compliance with a set of externally defined regulations.
“It is about creating a framework of decision-making that really adds value to an organisation. It is also about reaffirming the legitimacy of companies in the eyes of wider society,” he stressed.