The Handbook of Board Governance, 2nd Edition

24Corporate Governance in an Age of Populism

John Zinkin

Managing Director of Zinkin Ettinger Sdn Berhad

Introduction

This chapter is presented in two parts: The first explains why populism may create a political tragedy of the commons; the second questions whether modern corporate governance can help avert it and concludes it may, but only if CEOs, investors, and the accountancy profession change how they support boards when they make decisions.

As a firm believer in the merits of capitalism, like Ray Dalio, I fear we may see a replay of the 1930s with different actors, but the same outcome. Given the level of dissatisfaction with the current political-economic order, will good modern corporate governance be sufficient to prevent a political tragedy of the commons, caused by boards doing what is in the best interests of their individual companies without considering the collectively negative impact of their decisions on society as a whole?

Perhaps if boards were to focus on the three most important assets any organization has, namely reputation, people, and processes, they might be able to avoid creating a political tragedy of the commons. However, to do so would require a fundamental change in the attitudes of CEOs to their remuneration; and in investors to what is a reasonable rate of return; and in accounting to recognize the value of these three assets on the balance sheet to balance the costs they incur on the P&L.

A Populist Replay of the 1930s?

There are three reasons ...