Rewarding virtue: effective board action on corporate responsibility

Based on discussions with over 40 UK board directors, company secretaries and corporate responsibility professionals, this report explores the specific role of board directors in delivering corporate responsibility.

As the report highlights, the role of boards is to govern, not to manage. It is about setting overall direction, establishing boundaries and controls, recruiting and motivating talented executives and overseeing their operation of the business. Effective governance from the board is essential for companies to reap the long-term rewards for responsible behaviour and resist the pressures and temptations that will otherwise lead them astray.

The report makes a number of recommendations regarding actions of the Board. The Board should:

• set values and standards: be clear about the terms of the corporate responsibility contract, set explicit standards and values for the business
• think strategically about corporate responsibility: understand the problems in your markets, and design a business model that avoids them
• be constructive about regulation: support both self-regulation and government intervention to correct structural problems in markets
• align performance management: reward responsible success over the long-term, and not just meet financial targets over the short-term
• create a culture of integrity: set the right tone at the top and cultivate the right values in the corporate culture
• use internal control to secure responsibility: safeguard the company’s standards with robust internal audit and control systems.