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Institute of Public Administration
Institute of Public Administration | 57-61 Lansdowne Road | Dublin 4 | Ireland | Ph. +353 1 2403600 | www.ipa.ie
Irish Institute of Pensions Management
Governance Codes, Ethics and Codes of Conduct
Paul Turpin
31 October 2013
Questions
1. What is the value in adopting a corporate governance code?
2. Will things still go wrong?
3. What role for ethics and codes of conduct?
4. Who is accountable?
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© IPA
How can Governance Codes promote trust?
Crises have created mistrust Calls for more regulation Criticisms of boards of directors Concerns with stewardship
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Regulation and guidance seeks to address concerns
UK Corporate Governance Code (formerly Combined Code)
Code of Practice for the Governance of State Bodies
Corporate Governance Code for Credit Institutions and Insurance Undertakings
Stewardship Code (responsibilities of Institutional Investors)
Focus on the Board/ those with governance responsibilities
“Every company should be headed by an effective board which is collectively responsible for the long- term success of the company”
- Corporate Governance Code
What is the impact of more regulation and guidance?
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“My basic message today is that the buck stops with the Board of Directors”
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The Challenge
Concern about behaviors despite guidelines
Are there basic enduring principles? How can you insure ethical
standards? The Board must set the tone
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Adopting a Governance Code for an Organisation
What benefits should Code bring? What should be in a Code
– Learning from previous problems
Who will use a Code?– Internal– External
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Governance Briefing
Key roles and mandate of the organisation
Strategic and business planning Risk management, audit, internal
controls Role and composition of the Board Reporting and external relationships Standards of Behaviour
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Constant review of Governance codes
UK Code (formerly Combined Code)
– Boards of directors are responsible for the governance of their companies
– Comply or explain
– (aim to) attack “the fungus of “boiler plate” which is …dead communication”
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Corporate Governance Code for Credit Institutions (CBOI)
“The Board of each institution is responsible for:– The effective ,prudent and ethical oversight of
the entity– Strategy– Risk and compliance being properly managed
What does CB mean by ethical?
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Ethics
Determine what is – Wrong, right, good, bad
Reflected in codes of conduct Codes of conduct provide an aide against
which decisions can be made and acted upon
Stewardship Code
Institutional investors should– Engage with companies on matters such as
strategy, risk…and corporate governance– Have a policy for identifying and managing
conflicts of interest– Be satisfied companies adhere to the spirit of
the Corporate Governance Code
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© IPA
Why do things go wrong
Poor leadership and decision making processes
Inadequate systems and controls Ineffective risk management Poor standards of conduct
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Responses to controversy and misconduct
Loss of business Legislation and regulation Codes of Governance Codes of Conduct
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Codes of Conduct
“A Code of Conduct (contains) the principles that an organization considers significant and believes are fundamental to their successful operation”
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Content of a Code of Conduct
Integrity – neutrality, honesty
Information– Enhance accountability; Respect confidentiality
Obligations Loyalty Fairness
– (impartiality, employment equality) Work/ External Environment
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Code of Conduct - definition
The Code of Conduct serves as – a framework for ethical decision making within an
organization – a communication tool that informs internal and
external stakeholders about what is valued by a particular organization, its employees and management.
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Code of Conduct- examples
Supplier Code of Conduct – Apple is committed to ensuring that working conditions
in Apple’s supply chain are safe, that workers are treated with respect and dignity, and that manufacturing processes are environmentally responsible.
Google code of conduct – “Don’t be evil”– “it's about providing our users unbiased access to
information, focusing on their needs and giving them the best products and services that we can. But it's also about doing the right thing more generally
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Revenue Commissioners
Commitment to Quality Service– “devotes a great deal of time and effort to
providing a top quality service to our customers. We have a responsibility to provide clear information and to make dealing with us as easy as possible.
Presumption of Honesty– You can expect to be treated as honest in your
dealings with Revenue unless there is clear reason to believe otherwise
© IPA
The Seven Principles of Public Life (Nolan Principles)
1. Selflessness Decisions solely in the public interest
2. Integrity no obligation to outside individuals or organisations
3. Objectivity Choices made on merit
4. Accountability submit to appropriate scrutiny
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The Seven Principles of Public Life
5. Openness Restrict information only where public interest clearly demands
6. Honesty Declare and resolve any conflicts with private interests
7. Leadership Promote by example
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UK (Combined) Corporate Governance Code
What a Board does and how it sets the values of the company
Five Principles– Leadership - Board– Effectiveness - Composition– Accountability - Reporting– Remuneration - Sufficient – Relations with Shareholders - Dialogue
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Corporate Governance Codes- what benefits?
Aiding performance Legislation/ avoiding sanctions Reputation External credibility Ethical leadership and oversight
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Good governance requires leadership to walk the talk
“The tone at the top sets the tune in the middle…
“You don’t have to be a weather man to see which way the wind is blowing..– Bob Dylan
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Independent Commission on Good Governance in Public Services (2004)
1. Focus on the organisation’s purpose and outcomes for citizens and service users
2. Performing Effectively in clearly defined functions and roles
3. Promoting values for the whole organisation and demonstrating the values of good governance
The principles of good governance
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