Thomson Reuters Foundation What is corporate governance? (Apart from formal definitions) How a...

Thomson Reuters Foundation

What is corporate governance?

(Apart from formal definitions) • How a company is run, how it is seen to be run and for

whom it is run.

• How a company interacts with those who have an interest in how it is run (stakeholders).

• Running a company properly in the best of interests of shareholders or all stakeholders?

• Corporate governance vs Corporate social responsibility vs Business ethics.


What is corporate governance?• Apart from definitions, what news is involved?

• Boardroom battles• Too much power in one person’s hands?• Too much secrecy?• Cronyism• Shareholder revolts• Minority shareholders demand rights• Huge executive salaries • Massaged numbers• Conflicts of interest etc.



• Some journalists report on it even if they don’t realise it, and need more information/ideas..”

• Others may be unaware of the many stories awaiting them if they know more of the issues surrounding corporate governance.

• So highlight the issues rather than the name ‘corporate governance’?

• But you can usefully slip the term into articles more and explain what it involves (maybe in a box).



• Ethics/Honesty • But also Efficiency

• Responsibility (as well as Power)• Transparency• Confidence • Credibility• Balance

(Sounds like our job generally?)


Why is good corporate governance important?

Proponents say:• Better companies make better societies.

And good corporate governance:• Is a system by which a company is managed properly

and efficiently, benefiting shareholders, the economy and society as a whole.

• Helps corporations act in a logical and accountable manner.

• Helps economic efficiency and growth.

• Contributes to financial market stability.


Why is good corporate governance important?

Supporters say good corporate governance:

• Encourages investment. • Enhances investor confidence/interest at a lower cost to

the company. • Boosts companies’ competitiveness.• Makes corruption less likely.• Ensures fairness to shareholders.• Is part of the overall checks and balances along with

environmental, ethical, anti-fraud guidelines, laws etc.


However, please remember:• Good corporate governance will not guarantee efficiency

and success or create a profitable company by magic (but a lack of good governance could cause the opposite)

• “This work will not eradicate criminal activity, but such activity will be made more difficult as rules and regulations are adopted in accordance with the Principles.” (OECD Principles booklet)

• Good corporate governance will not necessarily stop companies going bust (but it could give them more chance of surviving).


And…

• Experts don’t spot all the frauds, and good corporate governance will not prevent them all (but there is likely to be more chance than when governance is bad).

• Some sceptics wonder how strong the correlation is in all cases and in all places between good corporate governance and successful performance.

• Some business people complain that excessive regulation – ‘red tape’ – makes it harder to be successful in business.

• So speak to several sources and shine that light in dark corners for the good of the majority!


What can journalists do in covering corporate governance issues?

Do our normal job, play our normal role:

• Serve our readers/listeners/viewers.

• Represent them when they cannot be present. Pay attention for warning signs when they do not.

• Find and tell the truth as far as we can. Shine a light in dark places.

• Expose problems/fraud/corruption/negligence/ incompetence/abuse of power (it isn’t always fraud).

• Act as independent watchdogs that bite as well as bark, especially where regulation/the legal system are insufficient or imperfect



• Challenge business people, politicians, regulators, and absolutely anyone involved. Check comments/claims.

• Ask various stakeholders for evidence to support their views and try to balance/contrast differing opinions. Views can genuinely differ.

• Be curious! Question inconsistencies, what looks too good, strange, unclear…

• Analyze (with help from sources). Sources add authority and give our audiences more confidence.

• Explain/Give background/Inform/Educate. “The mindset is key.”



• Highlight where transparency is lacking. Prompt companies to be clearer about how they are run and how they are doing, and explain things well.

• More transparency/disclosure or exclusives???

• Does a company explain its strategy and is it clear how this was decided?

• Company news is not just about numbers and past performance but what happens within a company to achieve that and what should happen next.

• Corporate governance is another important area to look at for the root of a company’s problems.



• Another reason to care - SELF INTEREST. Building knowledge about corporate governance issues will help you think of more story ideas and more questions.

• Our job is to ask (even simple/naïve??) questions, LISTEN and follow up the answers – you never know where they will lead.

• Interest in corporate governance tends to increase when markets fall and companies crash – these are good times to get your audience interested.

• BUT probe for problems that easily get ignored in boom times. RISK BEING CALLED NEGATIVE!



• Read footnotes, small print, appendices, assumptions, accounting policies – and see if they have changed.

• What’s missing? What do firms fail to report when they should?

• Not just the numbers but also the notes. What to they say about strategy, risks, delays?

• What don’t they report or highlight any more? Have they changed focus and, if so, why? Where do they make their money?

• What is too complex and why? Be sceptical about very fast change/growth.



• INCREMENTAL JOURNALISM – Get what you can into the public domain to start the process.

• Don’t be too ambitious/take too many risks to start with.

• What do you know? What can you substantiate?

• Show, don’t tell.

• Highlight some concerns and then be glad if other journalists follow your initial questions/exclusives.



• Make your audience familiar with key issues and why they are important. Introduce topics in a user-friendly way.

• People like reading about people in human interest stories. Humanise corporate governance stories.

• Explain what they mean for your audience. Highlight the powerful and the powerless.

• Personal finance supplements/A regular section on corporate governance issues so readers know to look there

• Examples/case studies help to explain..



• Highlight companies making public share issues as they will often be better at disclosure of information. Show them as examples.

• Produce rankings of companies on how they follow best practice on corporate governance or are the most and least admired companies etc.

• Submit rankings to companies/seek a discussion.

• Ask companies why they don’t follow accepted corporate governance ‘principles’ where others do.



• Probe to see if companies that say a lot about good corporate governance do what they say and don’t just indulge in a public relations exercise.

• Follow up/monitor any promises of action.

• Make foreign investors, analysts, portfolio managers and active market players your partners and contributors.

• Check relevant forums and blogs for tipoffs.

• Subscribe to specialist publications.



• Try to find whistleblowers – but be aware of the dangers.

• Raising questions at an early stage can warn people of potential problems before the authorities take action.

• It can influence governments/regulators to take action.

• Highlight what differs in your country from internationally accepted good or best practice (and ask why).

• See what laws/regulations/codes you don’t have in your country that others/neighbours do and ask why not?


How to get readers to take an interest in corporate governance questions?

• If they are shareholders, workers, customers, suppliers, financiers concerned about investments, people with pension funds, just about anyone should have an interest in corporate governance!

• Executive excess. Greed. ‘Fat cats’. Justice for small shareholders. Power struggles.

• Conflict between managers and owners (as well as other stakeholders). (Benevolent?) dictators pose risks in companies as well as in societies?

• Companies are not monoliths. It’s more than a question of a firm battling with the workers, as in old propaganda.


Our job

• So who wouldn’t be interested in such stories if told well?

• “Our work is patchworking – taking small pieces from everywhere to give a chance of a good story.” – Chavdar Parvanov, a journalist from Bulgaria.

• Longer-term investigative detective work can be important but corporate governance is part of our regular day-to-day work, too.

• Corporate governance is of wider interest, not just a specialized beat.

• For reporting on corporate governance we need to do our normal job – after doing our homework.

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