The gap between aspiration and reality couldn't be wider: On paper, almost all major companies and corporations are now committed to sustainability and transparency. However, the complete failure of internal and external oversight in the Wirecard fraud case, as well as the general outcry over the Supply Chain Act, have once again clearly demonstrated that good corporate governance cannot exist only on paper, but must also be practiced.
The danger often lies in focusing on formal requirements. While it's good and right for a company to make progress on diversity or to staff mega-topics like digitalization on the board, brochures about corporate responsibility are usually pleasant to read, and the term sustainability can be used freely and without too many self-restrictions. However, the attractive packaging should not obscure the fact that truly functioning corporate governance is not only demanded by various stakeholders, but is also in the vital core interest of every board and company.
This is all the more true as the global regulatory environment becomes increasingly unpredictable. A board that deceives itself (or allows itself to be deceived by the executive board) into believing that business in a dictatorship or autocracy is even remotely possible in accordance with its own self-imposed values and sustainability goals endangers the entire corporation. In addition to the obvious ethical issues and reputational risks, there are also countless business reasons that speak against avoidable involvement in an arbitrary legal system. The virtually boundless naiveté that prevailed from medium-sized companies to some DAX-listed corporations is giving way in recent months to what is often a rude awakening. This applies not only to the Far East, but also to rogue states much closer to home.
Only effective corporate governance, which honestly seeks to meet the conflicting demands of stakeholders while never losing sight of the organization's purpose, can ensure continued existence in turbulent times. The coronavirus disruption is far more than a warning shot. It is more like a thunderclap, a final warning to those boards and companies that have built their control structures on lies.
To stay on course in a storm, you need a functioning compass. Colorful brochures and cheap declarations of intent, on the other hand, can safely be thrown overboard.
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