Corporate stewardship and the Rhineland model
Letter to the Financial Times
12 November 2019
António Guterres is right to flag the important role of business leaders in the drive to foster inclusive growth and opportunities (“Progress towards sustainable development is seriously off track”, November 5). Without their engagement nothing will change. But even in the most progressive of debates on sustainable development, there is a failure to address the role of inclusive corporate governance in fostering and sustaining change.
The self-serving doctrine of “shareholder primacy” — dominant in Anglo-American jurisdictions — has to be deconstructed. The existence of executive-dominated unitary boards will resist cultural and institutional changes that are designed to transform the way corporations and board directors operate. This is a fundamental challenge. It can only be addressed by radical changes in the way corporations are governed.
There is a case for expecting publicly listed corporations to be obliged, by law, to appoint and operate with independent supervisory boards. These boards will in turn be expected to reflect the wider social and economic interests of all stakeholders. The supervisory board will be responsible for overseeing the activities of the executive board of management in the realisation of these objectives.
The model for this form of governance already exists in Rhineland jurisdictions in Europe. Over many decades these governance arrangements have fostered a very different style of corporate
stewardship and corporate responsibility. These important differences are not widely understood or appreciated in English-speaking countries. Time for a much better understanding of the role they can play in promoting sustainable development.
The Centre for International Economics