In this episode of The ESG Report, David Simon, author of the LinkedIn article ‘The “G” in ESG, is Tom Fox’s guest. They discuss the article’s content as well as the role of compliance in governance.
The Link Between a Company’s Meta-Contract and Governance
The term ‘meta-contract’ was coined by one of David’s Oxford professors, Alan Morrison. A meta-contract is what an organization is all about, including how it will and won’t do business. Governance refers to how well or how poorly a company adheres to its meta-contract. Tom mentions that monitoring this is something compliance professionals do day in and day out, and David agrees; ensuring that a company behaves consistently with its values is something compliance professionals are best at.
Incorporating Stakeholders’ Views in a Company
Once you accept stakeholder capitalism, you must ask yourself, ‘Where do I draw the line?’ To David, from an ESG perspective, the key to answering this is authenticity and integrity, “Look at your values and who your stakeholders are, and rank them in terms of priority. It’s a very individualized exercise, and it’s important for company leadership to be honest and look at who they are, and what they aspire to be.” He resists the idea of everybody fitting into the same box, because, “It’s bound to fail; I don’t think it really represents their true meta-contracts.”
The Importance of Compliance in Corporate Governance
David points out that compliance professionals are really well-suited to take the meta-contract and implement it in a way that’s enforceable and consistent throughout the organization. One of the great things about ESG is that it allows compliance to broaden its horizons. Compliance can get very focused on true compliance with the law or regulatory regimes, but there are certain violations and scandals that are worse than others, and that ties to what their meta-contract is. These violations may not be violations of the law, but rather, violations of who they are as an organization. David comments on this, “From a compliance perspective, compliance professionals need to think more broadly than just the laws; more about what their organizational meta-contract is, and take steps to avoid violating it.”
RESOURCES
Tom Fox’s email
David Simon | Twitter | LinkedIn | The “G” in ESG: Governance
