Good corporate governance is critical to the financial success of a company but it is also an indispensable tool, even a fundamental practice, for orchestrating business operations in the best manner. But what does this mean in practice?
Rytis Ambrazevičius, the new president of ecoDa, explained to “Naftemporiki” that it encompasses the cultivation of a highly motivated workforce, and a bolstered corporate image in the eyes of shareholders, potential employees, partners, suppliers, customers, and other stakeholders. These collective elements enhance a company’s resilience and ultimately contribute to its enduring success long term.
In this framework, ecoDa has designed a new tool, the European Board Diploma, in order to equip board members with the necessary knowledge and skills to succeed in the roles.
Ambrazevičius also referred to the cooperation with NED Club, noting that the effectiveness of corporate governance practices and the board of directors’ outstanding performance, which directly contribute to the company’s long-term success, are intricately tied to the professional competence of each individual director.
Τhe full interview follows:
- Everyone agrees that sound corporate governance is essential to reducing corporate risk, but not everyone defines it in precisely the same way. It is a term that encompasses so much. What does it mean for you?
As the adage goes, “Good corporate governance does not guarantee a company’s success, but poor corporate governance can significantly undermine its prospects.” In reality, there are many well-documented cases that illustrate this principle, such as Volkswagen, Theranos, Silicon Valley Bank, and Wirecard, to name just a few recent ones. To me, sound corporate governance serves as an indispensable tool, even a fundamental practice, for orchestrating business operations in the best manner.
Over the course of my extensive career spanning several decades across various companies, it has become abundantly clear that effective corporate governance plays a pivotal role in driving not only financial success but also a broader spectrum of achievements. This encompasses the cultivation of a highly motivated workforce, and a bolstered corporate image in the eyes of shareholders, potential employees, partners, suppliers, customers, and other stakeholders. These collective elements enhance a company’s resilience and ultimately contribute to its enduring success long term.
I have witnessed and continue to observe the tangible transformation of companies as they gradually and systematically embrace the tenets of robust corporate governance. This pursuit aligns not only with the objectives of shareholders but also with the broader economic aspiration of fostering robust, competitive, and successful enterprises as well as national economies.
In such an unpredictable world, defining a framework for decision-making is becoming even more critical.
- The European Union, frequently seen as the international pace-setter in ESG regulation, is currently making some decisive changes to its regulatory framework with its CSRD. What does the new directive bring for European companies?
The recent regulatory changes within the European Union pertaining to sustainability mark a significant transformation characterized by heightened transparency, enhanced accountability, and a fortified foundation of trust among various stakeholders. Historically, a substantial number of companies have been engaged in the practice known as ‘greenwashing,’ wherein they feigned responsibility and environmental commitment while engaging in deceptive practices.
The introduction of the Corporate Sustainability Reporting Directive ushers in an era of standardized norms applicable to all companies, thus rendering transparency and authenticity paramount. Consequently, discerning consumers, investors, shareholders, and other stakeholders will be empowered to distinguish between genuine corporate responsibility and misleading claims. Firms that have previously operated in a less-than-ethical manner now find themselves compelled to undertake substantial reforms in their business practices. Conversely, organizations that have long adhered to sound sustainability principles will enjoy a distinct competitive edge in this evolving landscape.
The implementation of the new and upcoming EU legislation related to sustainability will have a significant cost effect on companies. It is about the reallocation of the value that will not be given to shareholders and economies. We will monitor to what extent investors will support European companies. This could become a real test to assess investors’ ESG commitment.
The European Union wants to take the lead on those aspects, but to protect the competitiveness of our businesses, other countries will have to move in the same direction.
- What are the most common corporate governance risks that companies face today and what are the main “weapons” a board needs to address them?
In today’s business landscape, companies are confronted with a myriad of both established and emerging risks. These encompass ESG-related vulnerabilities, cybersecurity and data privacy concerns, regulatory compliance issues, threats to reputation, and the imperative for adept crisis management, among others. In light of these challenges, it is imperative for boards of directors to take a more proactive role in safeguarding the stability and prosperity of their organizations.
Furthermore, it falls upon both the boards and shareholders to ensure that the board’s composition is well-suited, with no deficits in essential competencies. The inclusion of independent directors must be substantial, and the board must exercise vigilant oversight. Additionally, the organization must maintain current and effective corporate policies and practices. Robust risk management protocols and diligent engagement with stakeholders must be firmly established. Timely and appropriate transparency and disclosure are equally essential components of this comprehensive approach to risk management.
The scrutiny of the whole society on businesses is growing. At the board level, that will mean that directors will have to move from “show me to prove to me that you did the right thing”. The board has to find the right tone in explaining the decisions taken and must feel accountable to justify and defend the choices made.
- ecoDa has designed a new tool, the European Board Diploma in order to equip board members with the necessary knowledge and skills to succeed in the roles. Could you enlighten us on this program?
Our education program – the European Board Diploma, was designed by senior board members for board members. It helps European board directors explore and understand the challenges in the years to come. It aims to deepen their understanding of the changing demands being placed on the boardroom and help them foster innovation and long-term value creation. This program has been conceived as an eye-opener and a peer-to-peer learning experience supplemented by real-life case studies. This program is an add-on to the programs developed by the national Institutes of Directors.
The program lasts for three days. The fourth day has to be chosen among three options (audit committees, relationships between the board and the shareholders, and climate issues).
- What other initiatives does ecoDa promote?
ecoDa is above all an advocacy body whose role is to monitor European developments in terms of Corporate Governance, to inform its members, and take a position on the draft proposals. ecoDa therefore indirectly ensures that individual board members are on top of things.
In terms of training, in addition to our European Board Diploma, ecoDa offers an exchange platform for its member institutes to discuss both the content and the methodology of their national education programs.
ecoDa is proactive on many subjects and reflects on the G dimension of ESG. We have just published a very useful document on how board members should ask themselves important questions in terms of sustainability.
We will soon publish two other reports, one of which offers an overview of directors’ duties and liabilities in Europe and the other a survey on the remuneration of non-executive board directors.
Finally, we are working on a manifesto for the next European Commission. We will urge the European Commission to leave time for European companies to implement new requirements. Regulators should also use the period of pause to have a holistic evaluation of the overall framework of company law, reporting, and its overall costs and benefits that are creating extra burden for the companies and impacting the global competitiveness of our businesses in Europe.
- Could you enlighten us on your cooperation with NED Club ?
The effectiveness of corporate governance practices and the board of directors’ outstanding performance, which directly contribute to the company’s long-term success, are intricately tied to the professional competence of each individual director. In the dynamic and rapidly evolving landscape of today’s business world, marked by increasing uncertainties, achieving excellence in corporate governance hinges on the unity of directors across Europe. Collaborative efforts in discerning optimal governance approaches foster an environment where the exchange of best knowledge and practices thrives, enabling boards to navigate challenges while upholding the highest standards of corporate governance and ensuring the sustained competitiveness and success of the company.
The European Confederation of Directors Associations (ecoDa) serves as the unifying platform for directors in Europe, boasting a membership of over 50,000 board directors from companies of diverse sizes and sectors. ecoDa assumes the role of the directors’ voice in Europe, actively advocating for enhanced regulatory frameworks that contribute to heightened global competitiveness among European companies. Membership in ecoDa offers a dual advantage to each national institute and its individual members, allowing them to actively contribute to an improved EU business environment while gaining insights into the latest corporate governance practices, thereby elevating the professional acumen of individual directors within the national institute. Moreover, educational and continuous professional development that is organised by ecoDa is one more important element that is beneficial for each individual member of the national institute of directors.
The collaboration between the NED Club and ecoDa is imperative for both organizations. Experienced directors from Greek companies possess the potential to significantly contribute to enhancing the European business environment. Recognizing the prevailing issue of overregulation, this contribution becomes particularly vital in the contemporary context. The partnership facilitates the exchange of knowledge and practices, the formulation of new corporate governance benchmarks, and collaborative efforts in developing guidelines and recommendations for boards across Europe. For directors of Greek companies, the alliance presents a threefold benefit, encompassing active participation in shaping a conducive business environment, staying abreast of the latest corporate governance practices, and leveraging an extensive network of board directors in Europe to expand business opportunities and attract directors to local company boards.
