Ahead of the launch of the joint educational program for board members, BOARD'S CLIMATE JOURNEY, by INSEAD Business School and Chapter Zero Kazakhstan, we are publishing an article based on an interview with INSEAD Professor Ludo Van der Heyden.
Professor Ludo Van der Heyden, a leading expert in corporate governance at INSEAD, shares his perspectives on the key principles of effective governance, the role of independent directors, and the importance of upholding a corporate mission. In this interview, he explores how public and private enterprises can enhance their governance practices, effectively manage conflicts of interest, and ensure the board of directors plays a critical role in protecting the interests of the company and its shareholders. Special attention is given to how corporate governance supports companies in adapting to modern challenges, including climate change.
INSEAD is one of the world’s leading business schools, renowned for developing managers with a global mindset. Often referred to as the "United Nations" of business schools, INSEAD attracts students from all corners of the globe. In the face of modern challenges such as climate change, this global perspective is crucial for finding effective solutions.
Climate change is a global issue, but its effects are always felt on a local level. For instance, in Switzerland, farmers are being forced to leave mountain pastures earlier than usual due to summer droughts. This underscores the importance of combining global thinking with local actions—a principle that is deeply embedded in INSEAD's approach.
Countries with unique natural and geopolitical positions, like Kazakhstan, can play a pivotal role in addressing global challenges. With its abundant resources, Kazakhstan holds a strong position not only in the energy sector but also on the international stage. Emerging countries can bring fresh ideas and energy to tackle global issues, whether in energy or geopolitics.
Corporate governance is not just about fulfilling tasks but also about providing effective oversight of processes. Adopting global standards like the OECD Guidelines (Organization for Economic Co-operation and Development) helps improve governance in both public and private companies. However, it is crucial to remember that corporate governance is more than just a set of rules—it is a culture of accountability cultivated within the organization.
Governance challenges often lie at the root of global crises, whether they involve war, climate change, or political conflicts. Companies must not only execute tasks but also create value for society. Therefore, successful corporate governance is the key to solving many of the world's pressing problems.
- What are the key pillars of corporate governance identified by INSEAD?
- The main pillars of corporate governance can be summarized into four key aspects:
The first pillar is legislation. Corporate governance is closely tied to legal compliance. Companies must act as legal entities that respect laws and protect the interests of all stakeholders. This ensures that neither the state nor shareholders can exploit a company solely for their own benefit. Companies must work for the public good, not harm it. For example, ExxonMobil once funded research that distorted information about the impacts of climate change, causing damage to both the environment and society. It is essential for companies to act ethically and abide by the law to maintain societal trust.
The second pillar is creating value for society. Good companies should not operate solely for profit but also to benefit society. They should improve citizens' lives and contribute to public goods. While companies can profit from their actions, they must simultaneously generate value for society. In the context of climate change, large corporations often have the most significant negative impact on the environment. They must aim not to exacerbate the problem but to solve it by creating value for both society and nature.
The third pillar is emotional commitment. Corporate governance cannot succeed if people do not care about the future of their company and the planet. Many individuals focus solely on money, salaries, and bonuses, but without genuine concern for Earth, effective governance and climate action are impossible. We take resources from the planet without giving anything back. Earth will continue to exist, but this might not concern us unless we learn to care for it. We must focus on sustainability and preserving life on the planet, rather than “saving” the planet itself.
The fourth pillar is intelligence. Addressing global issues like climate change requires smart and intellectual leadership. Solutions to climate problems will come through technology, innovation, and thoughtful approaches. For example, in Ancient Greece, only educated citizens could vote because they had a better understanding of societal needs. Today’s challenges require the same: intelligence to understand the needs of society, the planet, and companies. Otherwise, voting in some countries is meaningless when people are starving or living under corruption. Successful corporate governance demands a thoughtful and reasoned approach.
These four pillars—law, value creation, emotions, and intelligence—form the foundation of effective corporate governance. If a company neglects corporate governance, its management will not succeed. Without a positive spirit, governance will fail. If a company does not understand the law, it will violate corporate governance principles. Finally, corporate governance must serve the benefit of both society and the company.
Additionally, corporate governance is critical for attracting investments and capital. When a company needs assets, it turns to shareholders or investors. For instance, if I, as an investor, invest a million dollars in a company, I want assurance that I will get my money back and earn a profit. Corporate governance ensures the fulfillment of these commitments. If a company fails to meet its obligations, investors should have the ability to protect their investments through legal mechanisms. This brings us back to the first pillar—law. Corporate governance must guarantee contract enforcement and compliance with all obligations.
It is also important to remember that corporate governance exists within the context of national culture. In some countries, governance culture may be flawed, with companies focusing solely on task completion while neglecting responsibility and oversight. Kazakhstan has the potential to stand out as an example of a country with effective corporate governance, bringing benefits to the environment, investments, and its citizens. When corporate structures act responsibly, they become valuable to both society and the economy.
- What are the features, opportunities, and limitations of corporate governance in state and quasi-state structures?
- How should one act in cases where board members are appointed by the government, and how can the issue of conflict of interest be resolved?
- How do climate goals impact corporate governance, and what is the trend?
- What could be the algorithm for implementing corporate governance in an organization?
The webinar on YouTube:
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