The plough made it possible to cultivate fields systematically. That was a blessing: less hunger and less famine. The plough connected the farmer to the location, their field. They no longer wandered about anymore. They eventually became the serf of their field and of their plough. The instrument became the guiding principle for the way in which the farmer fulfilled their existence. The car and the plane offer enormous mobility. You can easily reach locations that used to be too far away. After the introduction of the car, the train, and later the plane, loved ones moved further away. You can always get there by car or by plane, can you not? As a result, we are drowning in cars and planes. The CO2 emissions associated with all this travelling are choking us. The tool steers our existence. The tool first serves us, then it becomes our master and finally our executioner.
The examples are borrowed from Ivan Illich (‘Tools for Conviviality’) from the 1970s. Recently, they have emerged from the dust in the Correspondent (Thalia Verkade). Corporate governance is also a tool. With corporate governance it is no different than with the plough. In order to prevent abuses and to allow processes to run with integrity, we make rules. Those rules are laid down in laws, in articles of association and in compliance regulations. Then we install supervisors. They have to check whether the rules are followed correctly. Initially, there is still some room for manoeuvre (‘comply or explain’). Soon, however, deviation is no longer possible. A system of sanctions for non-compliance follows. Fines are imposed. Initially small, then large. Reputations are destroyed because the compliance rules are not followed in full.
Then the supervised companies start reacting frantically. They do everything they can to avoid the wrath of the regulator and to avoid fines and reputational damage. They adjust their corporate structure. They change the organisational culture. They start imposing fines themselves. Customers are disposed of. “Derisking” is the name of the game. Suspicion, fear, and forms become the ‘new normal’ and many hundreds of forms and regulations govern business operations. Customers have transformed from kings on a pedestal to potential threats. The instrument has turned from a blessing for the consumer (what it was meant to be) into a scourge. Not just at banks.
Rinus Michels said: “Football is war”. For some, this adage also seems to apply to rules of good governance. People who make a mess of things and who demonstrate that they do not have a clue about the rules of good corporate governance (let alone apply them in practice) indiscriminately accuse others of violating these rules. Without showing any trace of integrity themselves, they accuse people inside and outside the organisation of a lack of integrity. What they often mean is that those others are not doing what they would like them to do.
Good corporate governance is not an instrument of war. It is not a battle over the application of rules. It is not a game of power. This means that the supervisors of the rules of the game must exercise restraint. They must not throw out the baby with the bathwater. The monitoring of transparency and integrity must itself also be carried out in a transparent manner. All forms of correction must be justifiable. No enforcement ‘just because the rules have to be followed’. The same applies to the players of the game. Directors must be willing and able to clearly and accurately answer the question: “Is this in the interest of the organisation, and if so, why?”. What the law and the code prescribe serves this purpose and not the other way around. Otherwise, the field becomes a killing field.