As a staunch advocate of good corporate governance, I have been both happy and dismayed by the developments on good corporate governance. Happy because there have been major strides in improving corporate governance practices and dismayed because many companies continue to be embroiled in governance controversies.
In the last few months, we have seen two banks, Silicon Valley Bank (SVB) and Credit Suisse, go under.
It makes one think: what else is needed since regulating bodies and institutions have created enough structures and mechanisms to prevent corporate disasters? These bank failures show that rules and policies are not enough. Despite universally accepted codes, corporate governance has different meanings and implications in the country where it is practiced and shaped by its culture.
I recently published a study about the role of religiosity and ethical leadership in good corporate governance. This study is particularly significant as the Philippines presents a cultural context that manifests in a unique corporate setup, such as the prevalence of family-ownership structure and cultural values, specifically religiosity, as espoused by the organization.
According to Gallup International, 90% of Filipinos declared themselves religious (having a strong religious feeling or belief). But does this religiosity lead to ethical behavior? A person’s upbringing is influenced by the values espoused by one’s religion. These values include social justice, ethical behavior, and good governance. We can capitalize on the role of religion as an enabler of ethical business cultures among board members. However, despite the inherence of religion as a positive influence on good governance, history has shown us how individuals have failed in their primary roles as stewards of their organizations. Similarly, companies with excellent corporate governance indicators did not guarantee ethical behavior or business success.
Behavioral transformation is a long and tedious process that requires psychological techniques but may benefit governing organizations in the long run. Ethical behaviors play a crucial role in forming and developing good governance behavior. Religion as a precept needs to be stronger to ensure good corporate governance. The link between religion and ethics has been, at best, ambiguous. As an educator and practitioner of good governance, I propose that board ethical leadership must be a component of corporate governance.
Ethical leadership is the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships and promotion of such conduct to followers. This can be related to how directors in organizations promote ethical behaviors and consequently communicate this behavior through examples and decisions made by the board.
To improve corporate governance practice, I strongly believe there is a need to provide a deeper understanding of director behavior by focusing on a specific foundational value (religion) and how this can be used to strengthen ethical leadership. Boards may use these insights to assess director behavior and how this can guide them in performing their roles as stewards of their organizations, not just through compliance and set structures but beyond compliance through behavioral and ethical foundations. Enterprise, ethics, and religion are interdependent components of good corporate governance behavior that organizations can harness toward organizational success.
Leveric T. Ng is a management consultant and faculty member of De La Salle University and the Ateneo Graduate School of Business. A DLSU DBA graduate, his research interests are in the areas of corporate governance and leadership. He is also a fellow of the Institute of Corporate Directors and a member of the Philippine Academy of Management.
