OECD focuses on trust in business
Professor Thomas Clarke, a corporate governance expert at UTS Business School, has addressed the Organisation for Economic Co-operation and Development Trust in Business Forum, held at its Paris headquarters on 1-2 October.
The event was the first of the OECD’s Trust in Business initiative, intended to bring together corporations, governments and the wider community to develop ways to build the integrity, accountability and transparency of business.
“The corporation is one of the most significant, if controversial innovations in history, but the impact of the corporation is questioned more than ever before,” Professor Clarke told an audience of international business leaders, regulators and government representatives.
“Corporations have to convincingly demonstrate their commitment to sustainable value creation in which the whole community shares,” he said.
At the forum Professor Clarke launched a new book: The Oxford Handbook of the Corporation, which analyses the contemporary purpose and performance of the corporation. The focus of the work is the innovation in corporate structure, purpose and operations.
“Continuously evolving, the corporation remains the primary instrument for wealth generation in contemporary economies, but is increasingly challenged regarding its accountability and impact on society and the environment,” said Professor Clarke.
In an opening address to the forum, Greg Medcraft, Director of Financial and Enterprise Affairs at the OECD and former Chair of the Australian Securities and Investment Commission, said business must constantly monitor its social licence to operate, as its capacity for retaining trust is critical to long term value creation.
"At a high level, trust is essential to support economic activity – to secure confidence in markets. It underpins commerce, trade and investment," said Mr Medcraft.
"At a company level, trust is important because it measures the extent to which corporate conduct and values are aligned with the law, and with customer expectations and outcomes," he said.
The forum took place in the context of the US Business Roundtable, which represents the leading corporations of America, recently abandoning their three-decade commitment to shareholder primacy.
The revised Roundtable statement instead favours the purposeful corporation that pursues the interests of all stakeholders including customers, employees and the community, as well as investors.
“It is a little ironic that at the very time both the OECD and the US Business Roundtable are expressing their commitment to the purposeful corporation, in Australia the ASX was persuaded to abandon a proposed formal acceptance of the social licence to operate by narrow-minded business interests,” said Professor Clarke.