Restoring Trust in Corporate Governance

by Benjamin W. Heineman, Jr., for The Harvard Law School Forum at Harvard Law School, January 27, 2010.

The business community faces a crisis in confidence both in its own ranks and in the broader society. Many are asking: how can corporations govern themselves more effectively – and truly be held accountable?

One answer is increased public regulation. The origins of the Great Recession include bad business decision-making caused in no small part by excessive and poorly structured corporate compensation. Not surprisingly, there are now energetic public policy debates about the governance both of the financial sector (a variety of measures are being considered to ensure safety and soundness) and of all publicly held corporations (with focus on an enhanced shareholder role and mandated compensation and risk processes.

Six Essential Tasks

But, regardless of regulatory outcomes, boards of directors and business leaders will still have to make complex decisions that direct the destiny of corporations. In doing so, they must, in my view, discharge six essential, interrelated tasks which are the foundation for rebuilding trust in corporate governance and addressing the ultimate questions of corporate accountability which underlie the governance debates…(continue reading)

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