A need for mutual learning

Written by YRK Reddy | Updated: Dec 11 2004, 05:30am hrs
Environmentalists have been propagating green investments and consumer bodies are advocating ethical buying. Now, religious leaders are calling for sanctimonious conduct in corporates. In some parts of the world, they have started using their clout to reform corporate governance practices. Just a few months ago, prominent leaders in Islamic countries started work towards a pan-Islamic corporate governance code of best practices. These, according to Global Proxy Watch, are aimed at helping corporates determine ways of aligning shareholder value with religiously acceptable behaviours. Helping this process is a new website to propagate Hawkama Ash-Sharakat (a rough translation of corporate governance) which is supported by the Global Corporate Governance Forum and the Centre for International Private Enterprise, USA. Similarly, a newly-formed Jewish Shareholder Engagement Network (JSEN) is reportedly mobilising funds to herald and influence corporate governance reform. The JSEN is raising over $1.5 billion in assets with start-up funding from the Nathan Cummins Foundation. JSEN is expected to influence corporate decisions and herald tighter controls as well as environmental sensitivity.

There was also a conference in October 2004 coordinated by the Alliance for Religions and Conservations (ARC) based in Manchester, England that launched the International Inter-faith Investment Group, drawing leading religions of the world into a dialogue. These two in combination could emerge as a powerful lobby leveraging on faith-based monies estimated at over $1 trillion worldwide. While such bodies may improve corporate value systems, ethical conduct and environmental concerns, their narrower versions could be controversial. For example, some might prevent investments in cinema, music, restaurants, breweries and the like. This may not be worrisome but some may even dictate which societies or communities are to be preferred for sourcing and supply of goods and services. Such narrower versions have the potential of instigating seclusion, exclusion, preferential treatment, compacts and controls that may adversely affect market mechanisms and governance of corporations.

While religious bodies are beginning to influence corporate governance in some measure, the reverse is yet to happen. It appears from controversies over the decades involving religious bodies (further dramatised with the controversial books by Dan Brown), that they can do with some learning on the core principles of corporate governance. This is particularly so as they are indeed beneficiaries of immense trust and blind faith from the public at large that is usually accompanied by massive flows of material wealth. Most donors may not have any explicit expectations from their donation, as it is considered an end in itself for invoking divine intervention. Further, the contributors do not have any motivation for or mechanism of coordination. Yet, religious bodies are fiduciaries, in a waythey must understand the donors and their wishes, expressed or implied, and align their activities and expenditures accordingly.

Religious bodies are beginning to influence corporate governance
Its time corporate governance specialists influence religious bodies
Weak oversight by the stakeholders needs to be supplemented by regulatory mechanisms, even if by self-regulation, lest the vacuum provides unwelcome incentives for predators. Development of terrorism in several parts of the world has been due to weak mechanisms that encouraged the takeover of such bodies by undesirable elements or even state-sponsorship of terrorism using these as fronts. Just as in the case of companies till recently, religious bodies also may have been more concerned with operational management than governance. They may have become strait-jacketed with traditional processes and conventions that do not reckon the need for governance mechanisms.

The principles of corporate governance are founded on transparency, responsibility, accountability and fairness. It is about time that corporate governance specialists initiate a sensitisation process among religious bodies and influence a governance reform process. Mutual learning will hopefully result in corporates drawing from religious values that prescribe good conduct, socially responsible behaviour and ethical decisionmaking, and the religious bodies understanding the best practices of governance.