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Governance

Who benefits from the crime?

Today, wrongdoings of many kinds that were once met with resignation, even indifference, make headlines. This shift in attitude was triggered largely by the corporate scandal leading to the 2001 downfall of Enron, once the darling of Wall Street, and of its auditor, Arthur Andersen. The Enron affair led to a growing focus on a concept that, until then, had received little attention: corporate social responsibility (CSR).

The consequences of economic crime can be enormous. Enron’s corporate fraud and ensuing bankruptcy affected one in every seven Americans! Take the case of Sun Hung Kai Properties (SHKP), a Hong Kong conglomerate: friction among the Kwok family members, majority shareholders, along with their dubious machinations, began making headlines in 2008. As Gilles Hilary reports in “Sun Hung Kai: A Governance Crisis in a Family Firm,” in 2008, the company’s share price was divided by 3.5!

Although the long-term impact of CSR on the business world will be positive, until its principles are fully integrated and promoted by corporate leaders, the efforts of whistle blowers will continue to be essential. Taking a page out of the book of Sherron Watkins, one of Enron’s vice-presidents, who denounced the company’s accounting improprieties, Human Rights Watch (HRW) drew the world’s attention to the plight of Burma’s persecuted Rohingya minority. This 2012 episode was reported by Yves Plourde and Shoma Patnaik in “Human Rights Watch: The Burma Situation.” Thanks to the rapid action of HRW and its use of satellite imagery, the world was alerted to the situation of the Rohingya people; this forced the hand of the Burmese government, which was not otherwise inclined to protect this Muslim minority in a largely Buddhist country.

The principles underlying CSR are of vital importance: they protect lives along with the financial future of shareholders and other organizational stakeholders. May they be taught, implemented, and promoted in our organizations!

 

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