Jan Eijsbouts and Steins Bisschops Jan Eijsbouts and Steins Bisschops foto: Sacha Ruland

Corporate governance put into practice

In Society
Written by  Femke Kools Monday, 10 January 2011 10:38

ICGI Research Institute: multidisciplinary corporate governance

While governance is a term widely used in many circles including academia, a precise and uniform definition seems to be lacking. Yet Bas Steins Bisschop, endowed professor of Corporate Law and Corporate Governance at Maastricht University, does not seem too worried. ‘If we knew exactly what it meant, we’d already have thought of a Dutch term for it,’ he says with a laugh. Luckily, he and his colleague, Prof. Jan Eijsbouts, are able to offer concrete examples of research conducted in the field of corporate governance, which is exactly the focus of the newly established Institute for Corporate Law, Governance and Innovation Policies (ICGI).

The ICGI is associated with the Maastricht Faculty of Law. The appointment of professor Steins Bisschop in 2007 – and his inaugural lecture the following year – instigated the establishment of the institute. His inaugural lecture on shareholder activism highlighted one of the research lines. ‘International shareholders compel Dutch companies to set ambitious financial goals. Should these companies oppose this pressure? Can they even oppose it? These are some of the difficult questions we are trying to answer.’ According to the professor, corporate governance involves the standards and measures used to manage an organisation. These can be viewed from a legal or a financial economics perspective. ‘As lawyers, we examine the tasks, responsibilities and opportunities of different parties in an organisation. What is the board authorised to do? Can members of a shareholders’ meeting demand an organisational split?’

Who is BP?

Another example of a typical ICGI question centres on the issue of liability. ‘With the contamination of the Gulf of Mexico by BP operations, one might ask: who is BP? Is it the English headquarters? In principle, they can’t be held accountable since their daughter company was active in the Gulf. But then the manager of BP headquarters poured twenty billion Euros into a fund to cover the damage. How likely is it that a local American judge would accept BP’s insistence that its headquarters aren’t responsible?’

What about Shell Oil? In their public campaigns and annual reports, the company claims that it operates in a socially responsible way. ‘Based on this, can the parent company be held liable by a Nigerian farmer whose land was polluted by Shell Nigeria? In other words: can a third party derive rights from the internal company code of the Shell corporation regarding corporate social responsibility? We certainly won’t dismiss this as a possibility.’
By ‘we’, Steins Bisschop is referring to his colleagues at the institute, including professor Kid Schwarz. Two new professors were recently appointed to strengthen the institute: Jan Eijsbouts and Sybren de Hoo. The former has enjoyed an impressive corporate career at Akzo Nobel, among other organisations, and the latter is a technician and sociologist with considerable experience in implementing corporate social responsibility (CSR) at various organisations and multinationals. The following scenario would be eminently suited to this field of research. Imagine you are interested in starting a factory for a western multinational in Indonesia. Do you adhere to western standards with regard to sustainability for example? Or do you limit yourself to local standards, which are usually lower and therefore cheaper?

From charity to CSR

‘The organisation’s role in the market economy has become an increasingly important issue in recent decades,’ Eijsbouts states. ‘Does this only refer to shareholders achieving the highest possible turnover? Or should the organisation also be expected to contribute to society? Over a hundred years ago, Philips introduced a type of “corporate social responsibility” in the Netherlands that was then referred to as charity work. The company built an entire village for its employees and even set up sporting associations. You did everything within confines of the company you worked for. While charity is voluntary, this form of charity certainly served corporate interests and was therefore not entirely altruistic. The question is whether this applies to Corporate Social Responsibility (CSR) today, at a time in which the pressure of public opinion mobilised by social organisations is on the rise. If a court of law fails to hold BP responsible for the oil spill, then society can use the court of public opinion to organise a boycott. The relationship between governance and CSR will also be reflected by this.’

Another development that Eijsbouts finds intriguing is the vast and intricate web of internal legislation utilised by large corporations. ‘These rules are applied alongside formal legislation in the countries where the corporation operates. How do these relate to each other?’ These are all questions for the endowed professor of Corporate Social Responsibility. He and his colleague De Hoo are also committed to teaching these themes in the international Globalisation and Law Master. ‘Students from two specialisations – human rights and corporate law – will be combined in a corporate social responsibility course. This should make for an interesting dynamic: they will experience each other at the university in the same way they might later encounter one another in society.’

Global LLCs

Comparative corporate governance is another concrete project currently being developed by the institute. A book is being written on the social characteristics inherent in companies around the world. There appears to be a basic universal corporate structure comparable to a Dutch NV or BV. ‘That is the type of research we do here at the institute – humble research,’ Steins Bisschop states. ‘The socially relevant follow-up question would be: would this type of enterprise lead to accountancy scandals or financial crises? We don’t expect this to happen. The cause seems to lie more in a lack of integrity within the organisation itself. This concept should be given a legal definition, but integrity is probably difficult to define in legal terms. We will be working on this issue alongside Nyenrode University and ethicists, psychologists and philosophers.’

It is the combination of corporate governance and corporate social responsibility in a multidisciplinary team that makes the ICGI such a unique institution. Steins Bisschop states, ‘We are a legal research institute but we also work with a professor in the field of technology and sociology. Our internal and external collaborations mean that the financial economics side of governance is also within easy reach. It’s easier to be socially relevant if you draw on more than just your own legal discipline. This allows us to translate scientific production into socially relevant recommendations for innovation.’

More information on the Institute for Corporate Law, Governance and Innovation Policies (ICGI) can be found at: www.maastrichtuniversity.nl/icgi

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