Corporate governance and corporate social responsibility: lessons from the land of OZ

Abstract

Australia corporate boards and senior management have been spirited from the Land of Milk and Honey (profit) to the Land of OZ. They are to embark on a journey, following the “yellow-brick road”, a proverbial path to a promised land of one’s hopes and dreams, in order to find brains, a heart and courage. The effect of new regulations introduced in Australia to curtail corporate misbehaviour is detailed by storytelling. The Wizard of OZ is the title of a story written by L. Frank Baum and published in 1899. In 1939, Metro Goldwyn Mayer Studios made a movie of the story. I have used The Wizard of Oz to argue that corporate boards and senior management need to make decisions using a balance of intellect (brains), emotionality (heart), and a sense of purpose (courage). The inspiration for using Baum’s story, as an analogy for the transformation needed in corporate boards and senior management, comes from Biberman and Whitty (Journal of Organisational Change Management 10(2):130–188, 1997). This research is based on interviews with Board members and non-executive directors from five companies listed in the Business Review Weekly (BRW) Top Twenty-five Companies in Australia (2007) and a range of secondary data sources. The financial and reputational success of the organisation and its members is out of balance with the human and social costs and benefits. Respondents confirmed that board members and senior management should willingly provide information about the corporation and its activities to its stakeholders, that information and data should be transparent, the true extent of director remuneration should be revealed and that financial reporting should be true and accurate. Board members and senior management can be assisted to operate in a way that observes socially responsible values and balances the obligation for profit maximisation with corporate social responsibilities (CSR). This study provides steps that organisations can take to achieve a balance of intellect, emotionality and sense of purpose and therefore realise their corporate social responsibility. The results of this empirical and secondary research suggest a method that may be used to make board members and senior managers more aware of their corporate social responsibilities and curtail corporate misbehaviour where the introduction of a range of new regulations has had little effect.