In an increasingly complex and competitive business environment, it is essential to recognize the importance of corporate governance in the effective management of companies – beyond business objectives—as it establishes a framework of responsibilities, rules, and ethical principles that should guide the company’s actions and relations with its various stakeholders sustainably.

Thus, the G of ESG (environmental, social, and governance) criteria, so relevant today for sustainable business success, becomes the first letter that must be addressed, because it focuses on how decisions are made, ensures that the promised values and purpose are present in the business strategy, in addition to sustaining from corporate leadership the commitment to the other letters (E and S) so that they are effective and not mere marketing strategies to appear sustainable without being so.

In the last 15–20 years, more and more business leaders have adopted sustainability strategies to reinforce their social license, which has been accelerated by the drastic decline in levels of trust in companies as a result of high-profile corporate scandals and fraud.

Transparency International’s Corruption Perceptions Index 2022 revealed that most of the world has made little or no progress in combating this scourge, which not only affects victims economically and commercially but also erodes trust in institutions, democracy, and the rule of law. In other words, it impacts us all.

The importance and urgency of the fight against corruption are such that companies must get involved and make every effort to prevent, detect and punish it, in addition to raising awareness among their employees, at all levels, of an ethical culture, where it is conveyed that it is just as important how results are achieved as how they are achieved.

For this reason, the role of corporate governments is transcendental, because they are the ones who will lead and drive the changes, promoting values such as integrity, transparency, ethics, accountability, and informed decision-making, seeking not only economic profits but also becoming an integral part of the environment where they operate, considering their stakeholders and being aware that, to achieve changes, they must start from the inside.

Companies with sound corporate governance and business ethics practices are less likely to be involved in acts of corruption and are less likely to face sanctions or fines for bad practices. In addition, they tend to be more prepared to face crises, which improves the perception of stability and resilience, increasing the confidence of investors and the public.

Therefore, raising the ESG standard is an essential pillar to achieving success, but also to prevent corruption in companies. For this reason, boards of directors must ask themselves what to do in this area, strengthen their corporate governance practices and ensure compliance with the defined values and ethical principles. For this, the quality and suitability of its members are fundamental, ensuring diversity, competence, and effectiveness, to achieve informed strategic decision-making that fosters the commitment of investors and stakeholders, being aware of the economic, social, and environmental impact of the company.

They must also ensure compliance with anti-corruption policies such as codes of conduct, gift policies, implementation of effective whistleblower channels, managing conflicts of interest, and promoting transparency and accountability, among others. However, its main task will be to strengthen and socialize the culture of corporate integrity, which discourages bad practices and creates a bond with its workers, making them part of the decisions and successes and, therefore, promoting their commitment to the company.

Although corporate governance does not only refer to the boards of directors, they play a leadership role in ensuring that the company fulfills its mission of being sustainable, which includes promoting ethical behavior and preventing acts of corruption. To be effective, it is important that compliance areas are also involved, and that they ensure that policies are being followed and that boards of directors are carrying out their duties of oversight and management of their compliance programs.

As we can see, G is vital for the health of the company’s business, which will protect its profitability, maintain the trust of its stakeholders and ensure the long-term sustainability of its operations.

Behind every company’s non-compliance, whether in environmental, social, or probity issues, there is ineffective corporate governance. That is why G must be a priority.


Published in El Mostrador

By Susana Sierra