The first day of ICMLG2015 has been completed, with a very pleasant dinner cruise on Auckland Harbour. The three-hour cruise gave delegates time to enjoy the view back to the city across one of the world's great harbours; to get to know each other better; and, to reflect on the conference to date. The conversations were upbeat—both for the venue and logistics (thanks AUT and Massey) and the topical nature of the presentations and discussion on Day 1. The following points provide the tiniest of glimpses into some of the conversations and thinking so far:
In addition, many new relationships were formed, ideas for collegial working groups were discussed and several invitations were issued for cross-border and multinational cooperation. (Gosh, that sounds like the OECD or the United Nations!) I'm looking forward to seeing and hearing how the discussion builds and develops on Day 2, starting with Andrea Thompson's keynote.
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Patricia Grant of AUT, New Zealand, posed a very interesting question this afternoon. For some time now, she has been wondering whether ethics might be an important element in the oft-discussed but poorly understood relationship between what boards do and business performance. The seemingly standard response to corporate or systemic failures in recent decades has been to introduce a new layer or new type of structure or compliance framework. For example: Following the failures of the early 2000s (Enron, MCI Worldcom et al), Messrs Sarbanes and Oxley sponsored a new statute in the USA. While the intent was good, the implementation was terrible. In effect, the statute imposed a new set of compliance demands and overheads. A new generation of consulting businesses (to either implement or avoid Sarbox) followed not long after. Further, and worse, Sarbox did nothing in terms of preventing the GFC because, human nature being what it is, directors and executives eventually found ways to circumvent the provisions. Grant suggested that regulators and boards need to move beyond structural responses to failure because such responses can't be relied on to work consistently and effectively. She added that researchers, regulators and boards need to look at behavioural responses and, more specifically, at the ethics and moral motivations of directors. It turns out these dimensions have not received much attention. Grant has decided to dig into this. However, two rather demanding challenges need to be resolved before much more progress can be made:
The audience seemed to agree that Grant might be on to something quite significant. If you'd like to help Grant, or offer your board as a participant, please contact me and I'll put you in touch with Grant. If her idea gets some traction, it could spawn a whole new field of research, and move the expectations of and on directors to quite a different place. And that could be exciting or scary, depending on your frame of reference.
Reports have emerged that the company that operates the New Zealand stock exchange, NZX Limited, has initiated a review of its own operating policies and processes—with a particular focus on conflicts of interest (and perceived conflicts). The review is timely, because NZX seems to have begun operating beyond what might be considered reasonable for a market operator. So, what's the problem? Let's start by looking at NZX itself. Here's how NZX describes its business activity: NZX builds and operates capital, risk and commodity markets and the infrastructure required to support them. We provide high quality information, data and tools to support business decision making. We aim to make a meaningful difference to wealth creation for our shareholders and the individuals, businesses and economies in which we operate. This seems reasonable. NZX owns infrastructure, operates markets (including regulation) and provides information. However, what is not stated is that NZX also runs a funds management business line. Therein lies the problem (or the perceived problem), because the funds management business invests in companies that are themselves listed on the exchange. If you'll allow a sporting analogy: NZX sets the rules, provides the playing field, referees the game and is a player as well. Player coaches are common in sport, but player/referees? Some might respond by saying this is a great example of the capitalist system in operation. It might be. But I can't help but wonder whether NZX is operating right at the very edge of what might be considered to be ethically and morally reasonable. Consequently, I look forward to reading the results of the review.
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