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![Page 1: Ethics, values and corporate governance Professor Stephen Bartos Director, National Institute for Governance 2006 Corporate Social Responsibility Summit.](https://reader035.fdocuments.us/reader035/viewer/2022062409/56649ec55503460f94bd0ca2/html5/thumbnails/1.jpg)
Ethics, values and corporate governance
Professor Stephen BartosDirector, National Institute for
Governance
2006 Corporate Social Responsibility Summit22 November 2006
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This presentation
• Ethics as a key component of governance– Along with legal compliance,
accountability, performance measurement, risk management
• The AWB case: how not to do it
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Governance: the topic of the moment
• Media, corporations, governments worldwide have discovered “governance” – why?
• Governance not an end in itself– there’s not even a consensus on what
matters in governance and how to improve
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Private sector governance cases
• Enron, World Com, Parmalat, HIH– And now AWB
• Heightened attention to corporate governance issues
• Variety of responses worldwide
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Is governance important?
• Not much empirical evidence linking good governance to good results
• Plenty of links between poor governance and poor results
• Performance determined by many factors
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Ethics and probity
• Bring down organisations if not observed
• Are determined by culture• Governance is vital
– Ethical standards start at the top
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Ethics and values
• Not just individual choices– Ethical behaviour is what matters in
the workplace– Your organisation can influence these– Ethics is managed through culture– Culture depends on incentives,
practices and signals
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Managing ethics and probity
• Discuss real ethical issues facing your organisation– Focus on tough dilemmas, not easy
cases
• Rewards and incentives– do you implicitly (or explicitly) favour
results over ethics?
• Modelling from the top
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Case studies in ethical culture
• Culture hits the bottom line– Foreign Exchange Trading at the
National Australia Bank
• Ethical perception is ethical reality– Arthur Andersen
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The best case study of all…
• AWB!• Biggest ever Australian foreign
kickbacks scandal• AWB was the world leader in the
Oil for Food kickbacks affair– Around $A300m ($US221.7m)
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Social responsibility
• Not something that just affects AWB and its shareholders (though it does)
• Affects Australia’s international reputation– As measured by Transparency
International, other ratings bodies
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Social responsibility
• Longer term impacts on Australian wheatgrowers– Mixed views: hope/fear the scandal
will lead to unwinding of the “single desk”
• Has made AWB a magnet for adverse media publicity
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Why did it happen?
• Monopoly over wheat exports• Confused accountabilities• Close, personal, interknitted
network of key players– Including government
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Monopoly
• AWB(International) has a monopoly over export of Australian wheat
• Can veto applications by anyone else to export bulk wheat
• Maintained by legislation (Wheat Marketing Act 1989 as amended)
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The problems with monopolies
• Lack of competitive pressure leads to lax management/governance
• Nobody “looking over their shoulder”
• Need for strong, independent regulation of monopolies– But AWB’s regulator a “toothless
tiger”
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Confused accountabilities
• Board represents two classes of shareholders– Class A: wheatgrowers, elect a majority
of the Board– Class B: equity shareholders, elect only
2
• In theory, all directors should look after all the interests, but hard in practice
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AWB share price
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Close knit relationships
• Everyone knew each other too well to ask hard questions
• A common problem with a small, closed policy community
• The networks extended beyond AWB into government
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AWB – Post Privatisation
Key:Appoint Influence Monitor
AWB Board
AWB CEO
AWB
Grains Councilof
Australia
National Party
Ministers
Auditor
NFF
AWB Class AShareholders
AWB Class BShareholders
Wheat ExportAuthority
ie. Graingrowers
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AWB’s lack of transparency
• Transparency = openness to public and any other external scrutiny – Online, on paper, orally
• Transparency enhances accountability, ethics, performance– And minimises risks
• Sadly missing in this case
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Feel free to buy the book…
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For further information
• Visit the National Institute for Governance at – http://governance.canberra.edu.au/
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Questions and comment