Governance is in short supply everywhere
But we should seize the moment to create regulatory structures that become the envy of the world
It is tempting to think that we live in a country of low standards and dirty deeds in both political and corporate life. Maybe we do, but it is also clear, to me at least, that governance is in short supply pretty much everywhere.
Some years ago I had occasion to sit behind two CEOs of multinational firms, with significant operations in Ireland, on a flight to New York. They were comparing notes on the most corrupt countries in the world in which to do business. I guessed that they were going to name some far-flung country with a tin-pot dictator and not much legal structure. I even wondered, briefly, whether Ireland would be mentioned. They quickly agreed that the country in question was the United States.
That is not much evidence upon which to base conclusions about global corporate governance – and I have often wondered how serious they really were. But the story does illustrate what we know about corporate governance around the world: it is a very troubled area.
Niall Fitzgerald, once chairman and chief executive of Unilever, a few years ago wrote in this newspaper of his concerns about the way business is conducted in Ireland and how he feared that he would have had to compromise his principles if he had pursued a career here. My recollection is that his pretty damning indictment of Irish governance and ethics caused barely a ripple.
Ethics and governance are often intertwined, sometimes quite distinct. Brian Lenihan was obviously a very ethical man, who set himself incredibly high standards. The mistakes his office made seem to me to be a catastrophic failure of governance: he was so badly advised. We had the financial equivalent of a nuclear accident and sent in the equivalent of plumbers and carpenters to fix it.
To this day we hear people saying there was no alternative to the blanket bank guarantee. That’s just wrong, in my view. We had the option of just guaranteeing future bond issuance by the banks, for example.
And I would really like to chat to those people who told Lenihan that Anglo and INBS were of “systemic” importance.
It is always clear when ethics are lacking. What is harder, much harder, is any attempt to define what exactly we mean by the term “ethical”. One of the key trade bodies of my own (recent) business – investment management – is the Chartered Financial Analysts Institute. It has an admirable one-page summary of what it considers ethical behaviour to be. But its “standards of practice” handbook runs to 219 pages.