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Jan 03, 2016

Expanding the ranks of governance ambassadors

Better treatment of employees, including ensuring they are well paid and have clear paths to advancement, may help them see the company's interests as their own 

Despite the passage of time between the Victorian era and our own, Charles Dickens’ cautionary tale, A Christmas Carol, continues to be a popular story to be revisited as the new year approaches. The cultural trappings of Ebenezer Scrooge and Bob Cratchit may be long gone, but the concern about how human beings treat each other, especially across the socio-economic divide, endures.
As was recently explained to me by Sally March, a compliance and ethics consultant based in London, employees of the millennial generation care much more that the companies they work for are ethical now than that they have a hallowed tradition of ethical behavior. (For more on this, see the SCCE roundup article in Corporate Secretary’s upcoming Winter edition.)
In the last two years, I’ve written a handful of articles advocating that companies look to their employees as governance ambassadors, taking a cue from the strategy of enlisting them as brand ambassadors for products and services companies are trying to sell. Creating a civil workplace culture that doesn’t tolerate intimidation or belittling of employees by senior executives and developing an ombuds program that gives employees a place to find out what their options are when they think something in their department is amiss are two major expressions of the governance ambassador ethos.

The next step along this trajectory may be to take a closer look at how salary disparities between top executives and the average employee possibly affect not only buy-in to compliance and ethics programs but productivity and financial results. Gaining such insights is not one of the aims of the SEC’s recently approved rule regarding pay ratios, which companies will have to start disclosing in their 2017 proxy statements. And there’s ample skepticism as to what value this sort of disclosure will create.
But anecdotally at least, however, the example set by Dan Price, CEO of Gravity Payments, a Seattle-based provider of credit card processing services for roughly 12,000 small businesses, raises some intriguing questions. As you’ll recall, in April Price slashed his own salary in order to create a $70,000 minimum wage for his 120 employees, the salary size he believes people need to live decently and experience the American Dream.
The jury is still out on Price’s controversial ‘living wage’ experiment, which certain rightwing pundits have misinterpreted as a political statement. Harvard Business School is reportedly monitoring his company’s financial results and we can expect to see some conclusions from researchers by the end of 2016. But qualitatively, his plan makes sense. As recently quoted in a profile in the Guardian, Price said, ‘People I care about, who’ve helped me so much, now have more dignity. The distraction of not having enough to cover the basics is gone.’
Corporate governance professionals are familiar with the concept of ‘beyond compliance’, which has come up at industry conferences in recent years and seems to be reflected in a growing number of companies’ CSR programs and other types of initiatives. Recognizing the constraints that many companies have because of staffing and budgets, I believe corporate secretaries and their governance colleagues need to be more aspirational in how they approach their duties. That means not being afraid to judiciously push the management team to take a more holistic look at governance and root it in the treatment of their own employees.
Let’s see what advances can come from enlisting employees as governance ambassadors. Thank you for your interest and feedback during 2015 and best wishes for 2016.

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary