Principles, Values, Purpose
There are many models to draw from when considering a Framework for Governance, or what is essentially a Constitution establishing the Principles by which an Organization is to be Governed. Some are more beneficial than others. This page describes Various Codes of Governance Developed Over the Last 20 Years
International Code of Ethics for Canadian Business
This Code was developed by several Canadian companies in 1997.
• Human rights and social justice
• Wealth maximization for all stakeholders
• Operation of a free market economy
• A business environment which mitigates against bribery and corruption
• Public accountability by governments
• Equality of opportunity
• A defined code of ethics and business practice
• Protection of environmental quality and sound environmental stewardship
• Community benefits
• Good relationships with all stakeholders
• Stability and continuous improvement within our operating environment
A. Concerning Community Participation and Environmental Protection, we will:
• strive within our sphere of influence to ensure a fair share of benefits to stakeholders impacted by our activities
• ensure meaningful and transparent consultation with all stakeholders and attempt to integrate our corporate activities with local communities as good corporate citizens
• ensure our activities are consistent with sound environmental management and conservation practices
• provide meaningful opportunities for technology, training and capacity building within the host nation
B. Concerning Human Rights, we will:
• support and promote the protection of international human rights within our sphere of influence
• not be complicit in human rights abuses
C. Concerning Business Conduct, we will:
• not make illegal and improper payments and bribes and will refrain from participating in any corrupt business practices
• comply with all application laws and conduct business activities in a transparent fashion
• ensure contractor's, supplier's and agent's activities are consistent with these principles
D. Concerning Employees Rights and Health & Safety, we will:
• ensure health and safety of workers is protected
• strive for social justice and promote freedom of association and expression in the workplace
• ensure consistency with universally accepted labour standards, including those related to exploitation of child labour
The Declaration on International Business Ethics
The Declaration on International Business Ethics is built on the precepts of the three religions of the People of the Book. Christians, Muslims and Jews have a common basis of religious and moral teaching. Four key concepts recur in the literature of the faiths and form the basis of any human interaction. They are: justice (fairness), mutual respect (love and consideration), stewardship (trusteeship) and honesty (truthfulness).
1. Justice: The first principle is justice, which can be defined as just conduct, fairness, exercise of authority in maintenance of right. All three faiths agree that God created the world and that justice must characterise the relationship between its inhabitants. Fair dealings between each other and between believers and others are constantly reiterated in the Scriptures as are God's justice and mercy in His dealings with mankind.
2. Mutual Respect: The second principle, mutual respect or love and consideration for others, is also inherent in the moral teachings of each religion. The word love has many meanings in most languages. But, as is clear from the reading of Scripture, the God of justice and mercy is also the God of love. What Scripture expresses as love is here rendered as mutual respect or reciprocal regard "love thy neighbour as thyself" that exists between two individuals. The application of this has come to mean that self-interest only has a place in the community in as much as it takes into account the interests of others. My neighbour in the business context can be defined as any person (individual or corporate) with whom the organisation comes into contact in the course of business life. Of paramount importance in this respect is the employee.
3. Stewardship: A third principle shared by all three faiths is that of stewardship (trusteeship) of God's creation and all that is in it. It is a richly diverse universe: "...and it was good". The Scriptures testify to the beauties and wonders of nature as signs of God's goodness and providence. Man is set over it all with delegated responsibility - a steward charged with its care and proper use for which he will have to give account. The Scriptures know nothing of absolute ownership: Man is God's trustee.
4. Honesty: The fourth principle inherent to the value system of each of the three faiths is honesty. It incorporates the concepts of truthfulness and reliability and covers all aspects of relationships in human life, thought, word and action. It is more than just accuracy; it is an attitude which is well summed up in the word "integrity". In precepts and parables, Scripture urges truth and honesty in all dealings between human beings. It is stressed that dishonesty is an abomination and bearing false witness breaches the basic laws of God. In business dealings, "true scales, true weights, true measures" are to be used. Speaking the truth is a requirement for everyone.
The declaration was first published in booklet form in 1995, and reproduced in Business Ethics – A European Review Vol. 5, No 1 (Jan 1996). A 2008 re-examination of its concepts and the values implied, entitled"Interfaith Declaration of international Business Ethic: 12 year experiences and new challenges." was published by Simon Webley of the Institute of Business Ethics, London.
The Clarkson Principles of Stakeholder Management
Four conferences hosted by the Clarkson Centre for Business Ethics & Board Effectiveness between 1993 and 1998 brought together management scholars to share ideas on stakeholder theory, an emerging field of study examining the relationships and responsibilities of a corporation to employees, customers, suppliers, society, and the environment. Based on the results of these discussion regarding the stakeholder concept, seven principles of Stakeholder Management were defined as they relate to the legal and moral duty of managers.
Principle 1 : Managers should acknowledge and actively monitor the concerns of all legitimate stakeholders, and should take their interests appropriately into account in decision-making and operations.
Principle 2: Managers should listen to and openly communicate with stakeholders about their respective concerns and contributions, and about the risks that they assume because of their involvement with the corporation.
Principle 3: Managers should adopt processes and modes of behavior that are sensitive to the concerns and capabilities of each stakeholder constituency.
Principle 4: Managers should recognize the interdependence of efforts and rewards among stakeholders, and should attempt to achieve a fair distribution of the benefits and burdens of corporate activity among them, taking into account their respective risks and vulnerabilities.
Principle 5: Managers should work cooperatively with other entities, both public and private, to insure that risks and harms arising from corporate activities are minimized and, where they cannot be avoided, appropriately compensated.
Principle 6: Managers should avoid altogether activities that might jeopardize inalienable human rights (e.g., the right to life) or give rise to risks which, if clearly understood, would be patently unacceptable to relevant stakeholders.
Principle 7: Managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders, and (b) their legal and moral responsibilities for the interests of all stakeholders, and should address such conflicts through open communication, appropriate reporting and incentive systems and, where necessary, third party review.
Further background and commentary on the principles is available on the Clarkson Centre web site: http://www.mgmt.utoronto.ca/~stake/Principles.htm.
Social Venture Network Standards of Corporate Social Responsibility
These standards were developed in 1999 by the Social Venture Network, a San Francisco based organization that was the first network of entrepreneurs who pioneered socially responsible business. Today SVN provides resources and assistance to socially responsible businesses and non-profits. The Standards list practices and measures for nine principles of Corporate Social Responsibility.
The company develops and implements ethical standards and practices in dealings with all company stakeholders. The company's commitment to ethical behavior is widely communicated in an explicit statement and is rigorously upheld.
The company acknowledges that many constituents have legitimate interests in its activities and discloses information in a timely manner so that stakeholders can make informed decisions. Stakeholder need-to know takes precedence over inconvenience and cost to the corporation.
The company balances the interests of employees, customers, investors, lenders, suppliers, affected communities, and other stakeholders in strategic objectives as well as day-to-day management and investment decisions. The company manages its resources conscientiously and effectively, seeking to enhance both financial and human capital.
4. Financial Returns
The company compensates providers of capital with an attractive and competitive rate of return while protecting company assets and sustainability of these returns. Company policies and practices are established to enhance long-term growth and shareholder value.
5. Employment Practices
The company engages in human resource management practices that promote personal and professional employee development, diversity at all levels, and empowerment. The company regards employees as valued partners in the business, respecting their right to fair labor practices, competitive wages and benefits, and a safe, harassment-free, family-friendly work environment.
6. Business Relationships
The company is fair and honest with business partners, including suppliers, distributors, licensees, and agents. The company promotes and monitors the corporate social responsibility of business partners.
7. Products and Services
The company identifies and responds to the needs, desires, and rights of its customers and ultimate consumers. It strives to provide the highest levels of product and service value, including a strong commitment to integrity, customer satisfaction, and safety.
8. Community Involvement
The company fosters an open relationship with the community in which it operates that is sensitive to the community's culture and needs. The company plays a proactive, cooperative, and where appropriate, collaborative role in making the community a better place to live and conduct business.
9. Environmental Protection
The company strives to protect and restore the environment and promote sustainable development with products, processes, services, and other activities. It is committed to minimizing the use of energy and natural resources and decreasing waste and harmful emissions. The company integrates these considerations into day-to-day management decisions.
ICGN Statement on Global Corporate Governance Principles
The International Corporate Governance Network (ICGN), founded in 1995 at the instigation of major institutional investors, represents investors, companies, financial intermediaries, academics and other parties interested in the development of global corporate governance practices. Its objective is to facilitate international dialogue on the issues influencing how companies can compete more effectively and economies can best prosper. The organization’s charter empowers it to adopt guidelines when it feels they can contribute to achieving this objective.
The ICGN embraces the OECD Principles as "a remarkable convergence on corporate governance common ground among diverse interests, practices and cultures." The ICGN advocates that, along with traditional financial criteria, the governance profile of a corporation is now an essential factor that investors take into consideration when deciding how to allocate their investment capital. The ICGN considers the OECD Principles the necessary bedrock of good corporate governance. The focus of these principles is heavily oriented toward the interests of owners and investors with rare mention of other stakeholders.
Adopted in 1999
ICGN APPROACH TO THE OECD PRINCIPLES: A ‘Working Kit’ Statement of Corporate Governance Criteria
1. CORPORATE OBJECTIVE
The overriding objective of the corporation should be to optimize over time the returns to its shareholders. Where other considerations affect this objective, they should be clearly stated and disclosed. To achieve this objective, the corporation should endeavor to ensure the long-term viability of its business, and to manage effectively its relationships with stakeholders.
2. COMMUNICATIONS AND REPORTING
Corporations should disclose accurate, adequate and timely information, in particular meeting market guidelines where they exist, so as to allow investors to make informed decisions about the acquisition, ownership obligations and rights, and sale of shares.
3. VOTING RIGHTS
Corporations’ ordinary shares should feature one vote for each share. Corporations should act to ensure the owners’ rights to vote. Fiduciary investors have a responsibility to vote. Regulators and law should facilitate voting rights and timely disclosure of the levels of voting.
4. CORPORATE BOARDS
The board of directors, or supervisory board, as an entity, and each of its members, as an individual, is a fiduciary for all shareholders, and should be accountable to the shareholder body as a whole. Each member should stand for election on a regular basis.
Corporations should disclose upon appointment to the board and thereafter in each annual report or proxy statement information on the identities, core competencies, professional or other backgrounds, factors affecting independence, and overall qualifications of board members and nominees so as to enable investors to weigh the value they add to the company. Information on the appointment procedure should also be disclosed annually.
Boards should include a sufficient number of independent non-executive members with appropriate competencies. Responsibilities should include monitoring and contributing effectively to the strategy and performance of management, staffing key committees of the board, and influencing the conduct of the board as a whole. Accordingly, independent non-executives should comprise no fewer than three members and as much as a substantial majority.
Audit, remuneration and nomination board committees should be composed wholly or predominantly of independent non-executives.
5. CORPORATE REMUNERATION POLICIES
Remuneration of corporate directors or supervisory board members and key executives should be aligned with the interests of shareholders.
Corporations should disclose in each annual report or proxy statement the board’s policies on remuneration—and, preferably, the remuneration break up of individual board members and top executives—so that investors can judge whether corporate pay policies and practices meet that standard.
Broad-based employee share ownership plans or other profit-sharing programs are effective market mechanisms that promote employee participation.
6. STRATEGIC FOCUS
Major strategic modifications to the core business(es) of a corporation should not be made without prior shareholder approval of the proposed modification. Equally, major corporate changes which in substance or effect materially dilute the equity or erode the economic interests or share ownership rights of existing shareholders should not be made without prior shareholder approval of the proposed change.
Shareholders should be given sufficient information about any such proposal, sufficiently early, to allow them to make an informed judgment and exercise their voting rights.
7. OPERATING PERFORMANCE
Corporate governance practices should focus board attention on optimizing over time the company’s operating performance. In particular, the company should strive to excel in specific sector peer group comparisons.
8. SHAREHOLDER RETURNS
Corporate governance practices should also focus board attention on optimizing over time the returns to shareholders. In particular, the company should strive to excel in comparison with the specific equity sector peer group benchmark.
9. CORPORATE CITIZENSHIP
Corporations should adhere to all applicable laws of the jurisdictions in which they operate.
Boards that strive for active cooperation between corporations and stakeholders will be most likely to create wealth, employment and sustainable economies. They should disclose their policies on issues involving stakeholders, for example workplace and environmental matters.
10. CORPORATE GOVERNANCE IMPLEMENTATION
Where codes of best corporate governance practice exist, they should be applied pragmatically. Where they do not yet exist, investors and others should endeavor to develop them.
Corporate governance issues between shareholders, the board and management should be pursued by dialogue and, where appropriate, with government and regulatory representatives as well as other concerned bodies, so as to resolve disputes, if possible, through negotiation, mediation or arbitration. Where those means fail, more forceful actions should be possible. For instance, investors should have the right to sponsor resolutions or convene extraordinary meetings.
Patagonia Corporate Values Statement
Patagonia was founded in the late 1950's by Yvon Chouinard, an avid rock climber, skier, surfer who, when not satisfied with the quality of the climbing tools available to him, began to make his own equipment that was more functional, more durable, and safer. Other climbers began to ask him to make gear for them as well. From that fledgling start selling gear from the trunk of his car, grew Chouinard Equipment, a small company that made tools for climbers. Alpinism remains at the heart of a worldwide business that still makes clothes for climbing – as well as for skiing, snowboarding, surfing, fly fishing, paddling and trail running. These are all silent, individual, human powered sports. None requires a motor; none delivers the cheers of a crowd. In each sport, reward comes in the form of hard-won grace and moments of connection between the individual and nature.
The company's values reflect those of a business started by a band of climbers and surfers, and the minimalist style they promoted. Its approach towards product design demonstrates a bias for simplicity and utility. The following Statement of Values was written in 1991, during perhaps the most severe operational crisis in the company's evolution, by board of directors member Jerry Mander, an author and deep ecologist. It was the first time that the company's operating principles were put down in black & white, and thereafter were adopted as the official primary governance document. It captures the spirit of the company's roots and its understanding of the goals it had continuously pursued from the start, and has allowed it to keep its bearing in the face of its stubborn reluctance to follow conventional business "wisdom" in pursuit of its own understanding of its Reason for Being. It is one of the most focused and encompassing corporate values statements that we are aware of.
We begin with the premise that all life on Earth is facing a critical time, during which survivability will be the issue that increasingly dominates public concern. Where survivability is not the issue, the quality of human experience of life may be, as well as the decline in health of the natural world as reflected in the loss of biodiversity, cultural diversity, and the planet's life support systems.
The root causes of this situation include basic values embodied in our economic system, including the values of the corporate world. Primary among the problematic corporate values are the primacy of expansion and short-term profit over such other considerations as quality, sustainability, environmental and human health, and successful communities.
The fundamental goal of this corporation is to operate in such a manner that we are fully aware of the above conditions, and attempt to re-order the hierarchy of corporate values, while producing products that enhance both human and environmental conditions.
To help achieve these changes, we will make our operating decisions based on the following list of values. They are not presented in order of importance. All are equally important. They represent the "ecology" of values that must be emphasized in economic activity that can mitigate the environmental and social crisis of our times.
- All decisions of the company are made in the context of the environmental crisis. We must strive to do no harm. Whenever possible, our acts should serve to decrease the problem. Our activities in this area will be under constant evaluation and re-assessment as we seek constant improvement.
- Maximum attention is given to product quality, as defined by durability, minimum use of natural resources [including materials, raw energy, and transport], multi-functionalism, non-obsolescence, and the kind of beauty that emerges from absolute suitability to task. Concern over transitory fashion is specifically not a corproate value.
- The board and management recognize that successful communities are part of a sustainable environment. We consider ourselves to be an integral part of communities that also include our employees, the communities in which we live, our suppliers and customers. We recognize our responsibilities to all these relationships and make our decisions with their general benefit in mind. It is our policy to employ people who share the fundamental values of this corporation, while representing cultural and ethnic diversity.
- Without giving its achievement primacy, we seek to profit on our activities. However, growth and expansion are values that are not basic to this corporation.
- To help mitigate any negative environmental consequences of our business activity, we impose on ourselves an annual tax of one percent of our gross sales, or ten percent of profits, whichever is greater. All proceeds of this tax are granted to local community and environmental activism.
- At all levels of operation -- board, management, and staff -- Patagonia encourages pro-active stances that reflect our values. These include activities that influence the larger corporate community to also adjust its values and behavior, and that support, through activism and financially, grassroots and national campaigners who work to solve the current environmental and social crisis.
- In our internal operations, top managment will work as a group, and with maximum transparency. This includes an "open book" policy that enables employees easy access to decisions, within normal boundaries of personal provacy and "trade secrecy." At all levels of corporate activity, we encourage open communications, a collaborative atmosphere and maximum simplicity, while we simultaneously seek dynamism and innovation.
----- from "let my people go surfing" by Yvon Chouinard, Penguin Books, 2005, pages 72,73