Montgomery County Class Resources: Corporate Governance

The business of corporate governance is critical in the execution and communication of sustainability activities, and for the maintenance of a company’s credibility among external stakeholders.  Corporate Governance: A Reporting Perspective, a book written by Phillips and Thomas of PwC, splits the topic into two main buckets: 1) the internal control structures that managers develop to run a business 2) the mechanisms used to report on these control structures to external stakeholders. 

The authors of this book explain, “Good internal control structures are a prerequisite for good business.  However, in order to leverage these structures fully – to turn them into a source of competitive advantage – management needs to be able to signal its competence to key stakeholders in a credible and consistent fashion.”

An example of this relationship between “doing” and “communicating” is exhibited in an article published on Tuesday in the Huffington Post.  The article highlights American companies that are reported to have the worst reputations, largely a result of a management blunder coinciding with poor communications.   Many of the companies on the list have faced crises in recent memory, namely BP and AIG, arguably a result of a failure of PwC’s first bucket, internal control structures.  The impacts that these crises had on the company, however, were products of the crises themselves as well as the second bucket, the mechanisms used to report on and control the perception to external stakeholders.  

Click here to read the full Huffington Post article.