How to stay compliant in the age of moralized corporate governance?
As corporate governance is becoming increasingly moralized, corporations can easily get conflicted in their decision-making process. Doing what is (seen as) right, is no longer clear, if it ever fully was. Public and private calls to action recently are more frequent, vocal and are often directly aimed at the corporation itself, its board and its strategy development and execution. Most of these calls are well-intentioned. However, they impose new requirements that are altogether rather difficult to integrate within current business affairs. Even in cases in which these requirements are suitable for instant implementation, they do inflict additional agency costs.
That is where decision-making gets tough. In a highly competitive environment, there is not always room left, to do what is (seen as) right. Doing what is right raises existential, formal and strategic questions about (ethical) perspectives for corporate action. On top of that, corporate action requires budget. When barriers to do business rise, rational boards are likely to re-evaluate their current affairs. Local legislators often overlook that a level playing field is non-existent on a global scale. If local conditions reach a certain threshold, re-evaluations potentially include decisions on relocation.
Only those corporations that are both able and willing to comply with increasing standards of doing what is (seen as) right actually have room left to act upon their (moral) views. This article aims to provide a general direction for corporate action in the age of moralized corporate governance. The Dutch corporate governance landscape is taken as an example to illustrate practical implications for boards and their compliance functions.