Leaders turn to the corporate governance x-factor

Ruby Gates

"We weren't stupid and we weren't evil. Nevertheless we managed to produce a generation of managers and business professionals that is deeply mistrusted and despised by a majority of people in our society and around the world. This is a terrible failure,” writes Shoshana Zuboff, a former Harvard business school professor.

That admission, plus the fact that corporations evolved on the backs of the geopolitical stage, has created a corporate landscape that, according to the Financial Trust Index, only 10% of Americans trust. And can you blame them? The corporate structure balances on the legacy building blocks of dominance, hierarchy and politics. In the wake of Enron, the corporate governance process came into tight focus.

But even with the Sarbanes-Oxley Bill mandating processes and procedures for financial transparency, we still had the Wall Street implosion, driven by personal greed, power and absent oversight. How is it that the heartbeat of our economic health literally sabotaged itself and our communities so easily? Did not one person cry into their martini with remorse?

It is obvious that we must remake our corporate governance framework such that ethics, responsibility and integrity become the defining qualities of business—not disproportionate profit margins—and the health of communities and larger economies trump shareholders in the boardroom. Business takes place in a world built solidly upon interdependent relationships, tangling together nations, leaders, consumers, technology, politics, economies and resources in a global pile of pick-up-sticks.

The corporate structure Henry Ford built no longer works. Corporations and leadership must shift to a world where the drive for dominance is replaced by integration, and hierarchy is replaced by collaborative kinds of networks, politics and economics. This means that corporate governance suddenly has a pile of x-factors to address.

Who would have predicted 100 years ago that we would be facing a world where 31 billion searches are conducted on Google every month?  Who would have predicted a world where majors in organic agriculture, e-business, nanotechnology and homeland security are commonplace? Who would have predicted the number of text messages sent everyday would exceed the planet's population? And who would have guessed more than 5 billion minutes per day are spent on Facebook, predominately by people older than 35?

Today's 21-year-olds have spent the equivalent of more than a year of their lives playing video games and more than two years watching TV. Who would have predicted that changes in climate would transform our vision for transportation, shift economic wealth, make water more valuable than oil and transform the built environment into living structures that harvest their own water and create their own energy?

Given this landscape, how can anyone create a corporate governance model based on business practices created 100 years ago? Considering most of us have evolved from the same paradigm, rewriting the way we address our ethical obligation to community, climate, energy and other governance issues won't be easy. In fact, taking a line from Einstein, "We can't solve problems by using the same thinking we used to create them."

This is the mother of x-factors: new thinking from unconventional avenues to rewrite our planet's approach to business. A broad call to action, I realize, but Shoshana Zuboff hit it on the head: we've done a great job of destroying the once trusted and revered corporate institution, because our training, instruction and models come from sources that are outdated and have not kept theory and practice in step with the reality of our evolving world. 

Corporate governance processes - designed and synched for a 21st century landscape - will look wildly different. In fact, many business leaders are well on their way. Energy management, steady-state resource use and carbon accounting are being adopted as responsible best practices. Local production for local demand is increasingly embraced, and steps are being taken to safeguard the interests of communities, economies and society as a whole. As this shift moves onward, terms like community development, optimized production and peer accountability will be key. Like a Hippocratic oath for business leaders, sustainable and regenerative economics will be set priorities in a new corporate governance mandate.

As sustainable business leaders, we are all well suited to rewrite the laws of business. We've excelled at integrating economic, environmental and social spheres to create alignment with business. From financial models to private/public partnerships, we have created opportunity for innovation and creativity to churn the outdated. We have internalized the delicate balance of business and climate, profit and community, people and growth. It is our time to redesign governance for the emerging 21st century landscape. 

MarketShift Strategies principals Ruby Gates and Stephanie Swanson will speak at the Annual Colloquium of the European Academy of Business and Society in Barcelona this September. MarketShift Strategies is a Portland-based business strategy group that aligns opportunity with market transformation.