Corporate accountability – blah, blah, blah

This morning, The Xylem Group had a very interesting teleconference. We discussed the debates and dialogs going on over corporate governance, the focus on profits, doing more with less, and accountability. Accountability to whom? That’s the big question.

Friday, The New York Times reported the average carbon dioxide reading surpassed 400 parts per million at Mauna Loa on Hawaii. Carbon dioxide is the heat-trapping gas that scientists believe is responsible for global climate change. The operative word is “average”. Readings have exceeded 400 PPM before, but now the readings of 400 PPM have reached an average daily level. Many countries (with the notable exceptions of the U.S. and China) have adopted a maximum target level of 450 PPM. At that point, we’re likely to experience some major changes that we humans may not be able to adapt to very well. If the scientists are right, without some major limiting efforts we will reach that level within 25 years.

Our children and our grandchildren will be living through the effects of global climate change. What will they see?

Rising temperatures mean significant climate change and implications for fundamentals like water and crop production. People can live without a lot of things, but not without food and water for very long. How will humans cope with long-term droughts in major crop-producing areas throughout the globe? The UN says that nearly 1 in 10 people don’t have clean water. Despite reduced birth rates in the developed nations, the population continues to grow. With over 7 billion people on the planet, the demand for fresh water continues to grow. Shortages of water mean shortfalls in crop production. In areas that are already suffering from dearth of water development projects and lack of food (where we already see major conflicts and human suffering connected with a winner-take-all mentality), how will the additional stress impact those people?

Rising sea levels will put billions of people in harm’s way. Where will they go?

How will all of this change global economics?

My colleague Robert Ballantyne has long been pointing to the unbridled power of our global corporations and lack of accountability. In a recent tweet, he said “Our systems of government, money, and corporations were developed when unlimited growth seemed possible. Those systems are obsolete.” Similarly, I have long lamented the “taking” mentality of financial institutions. John Bogle created my awareness of this issue. When you consider the amount of money that the financial sector takes out of our economy and never puts back (it is called asset management), what is the value of digital wealth? You can’t eat it and you certainly can’t drink it. With all of that power, the state that empowers creation of corporations requires some body of people (the board) to be accountable. What’s missing with many of our corporations is clarity about accountability, don’t you think? If (for example) a corporation board believes their only accountability is to the bottom line profits (shareholder ROI), what might be sacrificed in that pursuit? We see it happening all too frequently (JP Morgan Chase, Wal-Mart, Enron, garment industry and Bangaladesh).

Same is true for non-profits. In their non-ending quest for money (there is never enough), often the boards fail to recognize how resources could be better leveraged or possibilities for partnerships/collaborations. In other words, constantly focusing on the means does not ensure successful achievement of the Ends. In the larger scheme, how many more people could be served with better quality and at a reasonable cost to society (the commons) if boards took a holistic view of their existence/accountability?

Maybe a different dialog about accountability can start small with cities or municipalities, but it needs to start somewhere. Without incentive to change, nothing will change. A protest here, a shareholder reaction there, none of it is working.

Protests and government penalties? It’s like water off a duck’s butt.

I love the settlement the major banks made with our US government. The average homeowner who was wrongly or illegally evicted from their home will receive $300 on average. Oh, and by the way. The checks bounced. Great. Was that fair compensation for uprooting a family and forcing them to rely on relatives, friends, and the community to help?

As much as financial institutions want to blame the homeowners for poor financial judgment in taking out loans they couldn’t afford, it’s no wonder those same institutions believe it’s okay to shift the blame for their own lack of lending judgment to the rest of us. Oh, and yes, they made us responsible for the consequences, too. Notice how their fingers are pointing everywhere else? No accountability here! Dear banks: when you point at someone else, remember that three fingers are pointing back at you.

What is the board’s responsibility for a fair economic and environmental exchange? Is it fair for Wall Street to hoard billions and banking institutions to lend only to those who have demonstrated economic success? I’m not against people having money. I’m for the idea of creating institutional accountability for what is taken out of our resources (yours, mine, everyone’s). I’ll close with one of Robert’s tweets, “We, humans, have the power of change and transformation. We now need to create the organizational skills to be responsible stewards.”

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