• Commonwealth:
• Documents:
• Speeches by Secretary-General Don McKinnon:
• The Commonwealth strategy on corporate governance for 2007 and beyond

The Commonwealth strategy on corporate governance for 2007 and beyond

Date: 20 Feb 2007
Speaker: Secretary-General Don McKinnon
Location: London, UK

Good morning Ladies and Gentlemen, and welcome to Marlborough House, the headquarters of the Commonwealth.

You represent civil society – so you are Commonwealth partners in this great union of both governments and peoples. ‘Peoples’ often get their best representation through organizations such as yours.

You represent the private sector – so you are Commonwealth partners in creating growth in our societies. We believe in democracy: democracy with development; and you are the engines of development.

You represent international organizations – so you are multilateral partners, working multilaterally with us. We have worked so well with the World Bank, especially in our joint work on Small States. We have worked so well with the OECD, especially on offshore banking and unfair taxation.

So thank you all for taking time out of your own personal and business lives to come here today and work – on Mardi Gras – for the benefit of corporate governance and for the Commonwealth. I hope my colleagues who are organising this meeting are at least able to recompense you with some Shrove Tuesday pancakes for lunch…!

Now the subject of our meeting today is Corporate Governance. I guess that if I played ‘word association’ with the general public on ‘corporate governance’, I’d get words like ‘Enron’ and ‘WorldCom’. In this more informed company here today, I’d get more technical terms, like ‘stakeholders’ and ‘accountability’.

Either way, I know that this audience – and the audience outside in London or Lagos or Islamabad or wherever – understand full well that corporate governance is not, in fact, just the stuff of rich businessmen. It’s about the principles and the practices of the way our societies are run; and as such the effects of doing it properly or not are felt by real people, normal citizens….

It’s a topic in which I have taken a personal interest for a long time. Before I came to the Commonwealth I was involved as a Minister in bringing in corporate governance improvements in the central government ministries in New Zealand. I had started out on this work as a backbencher on the public accounts committee, doing just that for Air New Zealand. Ten years later, it’s gratifying to see that other countries are following that early lead – not least Australia and the UK.

I was also in a position to support the earliest Commonwealth programmes in corporate governance.

After I became Secretary General in 2000, I could do my bit to maintain the growing Commonwealth momentum on corporate governance.

- I recall the First African Regional Forum on Corporate Governance in 2001, launched by the Commonwealth and the Global Corporate Governance Forum (GCGF).

- I recall the Monterey Summit in 2002. Then, I could speak of the importance of corporate governance for development, as well as for the capital markets of the industrial countries. I remember we were joined by President Festus Mogae of Botswana, stressing how corporate governance was one of the pillars of NEPAD. His were powerful words.

- I recall the First Caribbean Forum on Corporate Governance in 2003: another joint Commonwealth-GCGF enterprise.

These were landmark events which illustrate how the Commonwealth works with our development partners to build up global consensus on key policy issues.

So I now strongly endorse this meeting on “Commonwealth Strategy on Corporate Governance for 2007 and Beyond”.

The year 2007 is indeed a milestone in corporate governance worldwide, as it marks ten years since the issue was recognized as a critical global issue.

But the Commonwealth Secretariat had in fact been working on corporate governance and company boards well before 1997. We were running policy and capacity-building work in places like Mauritius, Sierra Leone, and Ghana.

But 1997 was the year of the Edinburgh Economic Declaration, when Commonwealth leaders formally endorsed the need to establish and promote best practice in corporate governance, transparency and the fight against corruption, in particular in standards of behaviour in the public and private sector. 1997 was also the year of the East Asian financial crisis, and the realization that one of the main causes of this crisis was poor corporate governance.

It was the events of 1997 that led to the recommendation by UK Chancellor of the Exchequer Gordon Brown for the twelve principles of a sound international financial architecture, including of course corporate governance. He made them at the Commonwealth Finance Ministers Meeting in Ottawa in 1998, and repeated them at the World Bank / IMF Annual Governors Meeting in Washington a few days later.

Then in 1999 the Global Financial Stability Forum was formed, and the Global Corporate Governance Forum was officially established by the World Bank and the OECD.

So we can see that ten years ago the Commonwealth was ahead of the game on corporate governance. We know, too, that in a decade corporate governance has moved from passing fad to mainstream policy.

During the past ten years the Commonwealth has also made a huge difference to the debates and practice on corporate governance. Much of that good work has been built around the Commonwealth Association for Corporate Governance, based in Marlborough New Zealand. I’m pleased to see Geoff Bowes here today.

Consider these things:

- At a time when the focus of corporate governance was on the advanced capital markets and emerging markets in Asia, East Europe and South America, it was the Commonwealth which promoted corporate governance for development in Africa, in the Caribbean and in the Pacific.

- At a time when the mainstream interest in the corporate governance community was devoted almost exclusively to companies listed on the stock exchanges, it was the Commonwealth which advocated corporate governance for state-enterprises, for the banking sector, for public service agencies and for NGOs.

- At a time when the mainstream interest was on shareholder interests for the efficient allocation of investment capital, and when there were many who doubted the relevance and even the concept of ‘stakeholders’, it was the Commonwealth which supported the ‘inclusive approach’ and the links between corporate governance and corporate social responsibility.

- At a time when the efforts to promote corporate governance were mostly concentrated on regional and global policy forums, it was the Commonwealth which was working at the grass roots within member countries to help build up corporate governance institutions and to develop director training courses.

Indeed, for several years, Commonwealth Secretariat was perhaps the only international organisation that had a grass roots level training programme for Board Directors and other officials. The international community has recognised this outstanding work, and the International Corporate Governance Network – a network of institutional investors who control over US $11 trillion in investment – made its International Award to the Commonwealth Association for Corporate Governance in 2003.

- Since ‘97 the Commonwealth’s Directors Training on corporate governance has covered almost 40 countries, and directly trained over 5000 practising directors and chairpersons.

Indirectly, we have trained thousands more, by training the trainers of a number of regional institutions like the Ghana Institute of Management and Public Administration, the Private Sector Organisation of Jamaica, the University of the South Pacific, the Restructuring and Internal Audit Bureau of the Government of Kerala, India, and the Centre for Corporate Governance in Kenya.

- These are 5-day courses with an exam at the end, and a certificate for those who pass. There was an occasion when the CEO of a Caribbean company signed up for the course, but soon claimed that he knew all the stuff that was being discussed in the training. Well…. He failed the examination, while many of his junior colleagues passed. Not all were like him. Other companies in the Caribbean, like Grace, Kennedy & Company, have made it compulsory for all Directors to have corporate governance training.

These Commonwealth approaches were sometimes criticized. But today, the OECD has itself published Guidelines for State Enterprises. The BIS and GCGF have published guidelines and handbooks for the banking sector. The largest institutional investors are insisting that companies in which they put their money should have their own codes for corporate social responsibility. The IFC’s Equator Principles are cascading social and environmental responsibility down the global financial supply chain.

Some 40 developing countries have prepared their own national or regional codes. Many of those are Commonwealth countries working with Commonwealth help.

The essence of the Commonwealth approach is that it combines global best practice with grass roots experience, and shares them across the extensive network of the Commonwealth family. Without any fanfare, it’s remarkably effective. I am proud and grateful – not least to so many of you – for what the Commonwealth has done to promote corporate governance in its midst and beyond.

So where do we go from here? We cannot rest on the laurels of the past. We cannot just do more of the same. We must always be at the leading edge of development thinking and practice. We must identify the emerging critical issues of the future and lift them to the prominence they require. We must initiate pre-emptive action to prevent today’s emerging issues becoming tomorrow’s intractable problems.

The Commonwealth Secretariat is too small to be a major aid donor to help solve global scale problems. But we are certainly not too small to be the policy entrepreneurs for global scale programmes.

What we have is truly global: the power to communicate through both formal and informal networks; the power to convene the largest and the smallest, the richest and the poorest, the most powerful and the weakest nations on this planet. There is no other organization which can do all that.

Part of your role today is to map out our future role – ‘for 2007 and beyond’ as today’s title says.

Here are a few of my personal pointers for your deliberations.

- First and foremost, we must act in the best interests of the member countries of the Commonwealth, and not just for the interests of the big organizations. We are Demand-, not Supply-Driven.

- Second, we need to fit in with the emerging trends of corporate governance. We don’t want to be yesterday’s people dealing with yesterday’s problems. We need to see that Commonwealth countries are prepared for the future.

- Third, everything we do must be within our realistic capacities – and add value for money.

- Fourth, the Secretariat and the Governing Councils of the Commonwealth must always look for cooperation and synergy among and within the various Commonwealth associations. But that needs thought. It means looking for our partners to demonstrate their core competencies and their fitness for purpose – it’s a case of which organizations can be trusted to do what corporate governance tasks better than others, not just which organization can expand its size and scope the quickest.

- Fifth, we must always link corporate governance with our broader goals in the Commonwealth, namely poverty eradication, democratic governance, the rule of law, and institutional development. Corporate governance has its place in a bigger picture.

We in the Commonwealth have spent just about one million pounds on corporate governance over the past ten years. In relative terms that’s tiny – in real terms it’s a huge amount for us. Our money goes furthest when others build upon it – people like yourselves.

I look forward to seeing the results of these talks. I look forward to presenting them at September’s Finance Ministers Meeting in Guyana, and at November’s Heads of Government Meeting in Kampala. I wish you the very best of luck – thank you.

ENDS

Download the speech: The Commonwealth strategy on corporate governance for 2007 and beyond