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“An entrepreneur is the engine of change. The dilemma: The glue that connects entrepreneurs, capital and the legal system.”

The real problem with companies today?

“A lack of purpose, intent and transparency.”

That’s how Erik Trojian, director of policy for nonprofit B Lab, opened his presentation at the recent seminar held jointly by Georgetown University, the Caux Round Table and the Sustainable Business Network of Washington (SBNOW).

The theme of the two-day seminar was weighty: Ethics, Leadership and Sustainability – to explore how the capitalist spirit of free enterprise and social entrepreneurship can help transform economic systems and promote social justice, basic rights, and human freedom around the world.

Common among the presentations of the day was a repeated emphasis on corporate governance, beginning with Trojian.

Modern Capitalism & Benefit Corporations

Trojian and his team are on a mission: To get all 50 states of the United States of America to sign the benefit corporation legislation into law. So far, they have succeeded in seven states.

He explained their goal:

“Modern capitalism began at a particular point of time in a certain type of culture. Somewhere in the 1960s, values began to shift and outcomes began to change. We want corporations to have an alternative form of operation that predicates protecting a business’ social and environmental communities.”

After a powerful presentation on the what, how and why(s) of the benefit corporation – a subject that has been covered quite comprehensively by CSRwire in recent weeks – Roderick M. Hills, Sr., former chair of the SEC and cofounder and chair of the Hills Program on Governance at the Center for Strategic and International Studies took the podium.

“Fixing” Bad Corporate Governance

“The Securities Exchange Commission [SEC] was set up to have more finite control of corporations’ governance. Auditors were expected to act on all suspicions. We convinced the New York Stock Exchange to address disclosure and transparency,” he started.

The next antidote according to Hill: The Foreign Corrupt Practices Act.

“The Act’s real problem was its uncertainty. They don’t want to deal with figuring out what is a crime and what isn’t resulting in people doing whatever they want to do. Plus the Act was not valid outside the geographic boundaries of the U.S. The rest of the world has no incentive to use this,” he said.

Aligning Board Service with Governance: A Conversation with Lucy Marcus

What’s really wrong with most corporation’ boards set up and governance standards according to him? His concerns were multifold so I turned to Lucy Marcus, renowned corporate governance expert, CEO of Marcus Consulting Ventures and Reuters columnist for some answers:

1. Too Much Agreement in the Boardroom

“There are too many directors today who would rather quit than disagree.”

Lucy: Asking the hard questions in the board room is essential, and also being willing to be persistent in the pursuit of the best outcome for the company and stakeholders is essential. Those are the kind of independent directors we want in the boardroom.

Anyone who is not willing to operate in this new reality doesn’t belong in the boardroom, and as we develop & educate new directors they need to know that this is what shall be expected of them.

2. The Fiduciary Responsibility of Directors

“There is a paradox in the country. Independent director doesn’t equal independence today. Every director has a preset job description regardless of who he represents/brings to the board.”

As directors it is vital that we understand going into the post what our job is inside and outside of the boardroom, what skills and knowledge we bring to the table, and also that we also operate beyond those strict skills we bring to also be able to synthesize data quickly and to make decisions in a well-informed and responsible manner.

3. Mandatory Retirement

“The mandatory rotational retirement is a terrible idea. There is no auditory protocol built-in and it gives directors too short a time to compel change, set standards, make a difference.”

I believe strongly in term limits. Best practice, as set out in the U.K., is several terms that add up to 9 years, and I think this is correct.

There is no way that someone can maintain their independence for much longer than that, and if the board room is to remain a place for dynamic discussion, it is incumbent upon boards to continually refresh themselves so that the people around the table bring a balance of continuity and change and the company is able to keep its finger on the pulse of changing agenda items, be it corporate social responsibility, technology, or anything else that is relevant to continued strength, growth and wellbeing of the organization.

If Capitalism Isn’t Bad, Are Capitalists?

Despite the somber notes, Bob Edgar, president and CEO of Common Cause, perhaps encapsulated the day – and our present crises – most succinctly with one question:

“Is it appropriate for [a form of] capitalism to exist that leads to unemployment, slavery and excess profits above all else?”

Readers: It’s your turn to participate in this dialogue and become the change makers you seek from our leaders. How are you solving ethical dilemmas between personal values and professional responsibilities?

As Chairman of the Hershey Company James Nevels put it recently at the BCCCC conference, “CSR above all begins and ends with personal responsibility.”

How do you define personal responsibility – and extend that to corporate responsibility?

Originally written for and published on CSRwire’s Commentary sectionTalkback on April 4, 2012.

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