Failure in corporate governance is a real threat to the future of every corporation. Corporate governance as a business ethics issue is a hundred times more powerful than the internet or globalisation and can destroy your business in a week. To make matters worse, standards of corporate governance are changing rapidly in response to random events which capture public imagination. In business ethics, what was good is becoming bad and what was considered bad is now good. Standards for corporate governance that have worked for decades are looking old fashioned or immoral while other practices that raised questions are becoming totally acceptable.

See new book - Building a Better Business by Patrick Dixon - on business ethics, corporate governance, profits and growth.

So what is going to happen next in corporate governance? How can corporations use corporate governance to restore confidence and protect themselves against tomorrow’s headlines? What will be the new “Gold Standard” for corporate governance and business ethics? How much further than legal minimum requirements for corporate governance should corporations go to ensure sustainable success?

• When corporate governance goes wrong who gets blamed?
• Impact of media allegations of dishonesty, fraud or corruption of senior executives or directors – and how to protect business ethics reputation using robust corporate governance
• Why goalposts for corporate governance will go on changing, and how to get ready
• Urgent need for all corporate governance to be whiter than white, with unquestionable business ethics and risk management
• Ensuring corporate governance compliance - board duties of care and responsability in the future?
• Defining clear areas of corporate governance responsability of boards and directors
• Using corporate governance to balancing interests of different constituencies and stakeholders
• Why we have to separate board scrutiny role from management power
• Ethical / society responsibilities of directors and large investor “owners”
• Independence of audit, nomination and remuneration committees?
• “Duty of curiosity” by directors to ask very awkward and sensitive questions
• Improving quality and flow of information within a corporation’s governing structure

WHY WE GOT IN SUCH A MESS
Free market ideology was that corporations were kept responsible to customers, shareholders, workers and society by customer and investor behaviour, seen in share price. Millions of individual “voters” in the market place ensured they behaved. “Bad” corporations were punished by selling. “Good” corporations” were rewarded by buying. “Market forces will sort it all out”. This ideology weakened the idea of corporate governance and accountability.

WHY WE STILL CAN’T TRUST THE NUMBERS
• Conflicts of interest remain in all audits even where consulting links are abolished
– Concerns that some auditors are looking for jobs in the companies they audit
– Auditors under pressure to get next year’s audit business
– Old accounting standards do not always give fullest picture
– Globalisation and e-technology are making reliable audits extremely difficult

EXPECT MORE CONFLICTS OF INTEREST AMONG GLOBAL AUDITORS
Consolidation at top end of professional service organisations means global players are running out of firms to approach to provide independent advice over large complex deals
• Conflicts of interest are growing rapidly – made worse by the collapse of Arthur Andersen, with companies in danger of representing the interests of more than one party
• Expect future accusations of breaks in “Chinese walls”

TRUST TAKES YEARS TO WIN AND HOURS TO LOSE
System of corporate governance must win trust of the international community
• Steps to rebuilding trust in the corporation
– T ransparent – totally open, going beyond current requirements or expectations
– R esponsible – clearly acting in the broader and longer term interests of all
– U ncompromising – total commitment to highest moral positions
– S uccessful – great results combining excellence in all areas with strong values
– T emperate – taking care to avoid major risks, wild decisions and extravagance

CEO CONFLICTS OF INTEREST MUST BE DEALT WITH
• Making decisions that benefit the CEO at expense of the future of the company, made worse by the large stock options given and other triggered incentives,
• Hiding how much the CEO takes - non-recording of stock options as an expense, overly-complex complex reporting

ACCOUNTABILITY CONFLICTS FOR STAFF
The fundamental issue at the heart of many recent scandals
• “I did what I was told” –
• So who do you serve? Your boss? The boss of the boss? CEO? Board? Shareholders? Customers interests? General public? Courts of law? Your own conscience?
• Extreme pressures on employees to toe the official line
• Harassment and threats by people representing huge power

HOW CONSULTANTS AND ADVISERS GET COMPROMISED
Who is the consultant or adviser accountable to if things are discovered?
• To the individual who set up the arrangement and is asking for the advice (who may be part of the problem)? His or her boss? The CEO? The board? The shareholders? The government? Consumers? The public? Who do you tell and when?
• What are the limits of confidentiality in consultancy?

HOW THE MEDIA CAN BE COMPROMISED
• Media investigation should be a powerful corrective force, exposing wrong-doing, but media depends on advertising. Dangers of alienating big funders of media companies.
• Media is also sensitive to news manipulation and lobbying, including benefits for journalists writing stories
• Need for transparency – declaring interests of journalists and editorial team including those of the owner(s)

HOW GOVERNMENT CAN BE COMPROMISED
• Lobbying budget in US greater than GDP of 57 nations
• Over 100 lobbyists per Member of Congress
• $5bn a year industry designed to create new laws or regulations, change existing ones, limit corporate liability, create barriers to entry for competitors, change who gets elected
• Potential for corrupting the democratic purpose
• US Government shell-outs to business are worth more than $300bn a year
• Selective tax breaks, trade policies and spending programmes are all sensitive areas
• risk of corruption and danger of distorting free market

HOW CORPORATIONS CAN OUT-GUN GOVERNMENT LAWYERS
• Government will increasingly target corporations as well as individuals with legal action
• Large corporations have deeper pockets than legal budgets of government
• They often get better quality representation from huge heavy-weight teams

“SUCCESS PLUS” – Doing great things in the right way
Success itself is being redefined – fundamental rethink about the purpose of corporations. Corporate responsability will be far more widely interpreted. REAL SUCCESS will be everything we have previously taken for granted in high performing companies PLUS the highest ethical standards in all areas.

BUILDING A BETTER WORLD – core value and universal slogan
Corporations will be expected in future to “build a better future” – not only for their shareholders but also for their customers, workers, business partners, community, nation and the wider world. Those with effective corporate governance based on this core value will have an added competitive advantage: attracting and retaining talent and generating positive reactions in the marketplace.

New consumer values will demand a new approach to marketing

■Get ready for the greatest shift in consumer values for fifty years
■Fundamental attitude / fashion changes are about to sweep through society
■More powerful than internet, biotech and globalisation combined
■Accelerated dramatically by recent events, chaos and uncertainty
■Huge future impact on all marketing activity, business and personal decisions
■Became obvious to me as a Futurist as well as a physician

Big questions about the value of “progress”

■The revolution began shortly before the Millennium - the New Dawn
■We’ve never had so much, consumed so much, enjoyed so much
■A century of science, medicine and technology has improved our lives
■Yet it’s left us time-hungry, seeking greater work-life balance and meaning
■Deep issues remain untouched in our families and neighbourhoods
■We created a global village without knowing how to live together inside it
■Opened the doors to designer life, cloned babies, biotech war and more
■Result: people asking questions - does more always mean better?
The ultimate marketing slogan or advertising banner

■We build a better world for you - the greatest claim of all
■A better future for you, your business and your world
■It also happens to be the reason for everything that people buy and do
■Improving something, in some way, somewhere, for themselves /someone else
■People like to feel the world is a better place with them living in it
■That’s why 60% of Americans enthusiastically give a total 20 billion hours a year to worthy causes - equivalent in value to 4% of the entire US economy
■They want to feel good about what they do and buy

One simple truth is the key to all marketing in future

■Building a Better World is the big value, the key to selling in future
■Four Corners of the Human Heart motivate us, but marketers focus on one
■Satisfy Individuals - basis of most advertising campaigns
■Support Family - your inner circle of special people
■Strengthen Community - your neighborhood, city, nation
■Sustain The World - life on earth, environment, your own world

Connect with all the passions people have and they’ll follow you to the ends of the earth to support your business. They’ll spread goodwill, work hard for you - buy your products, your services and your stock with pride. You’ll attract the best people, form highly motivated teams, sell the strongest brands with greatest purpose and highest values, promising all a better future.

Surveillance is getting easier. Bugs are getting better. The other day I was lecturing to twenty senior executives from a major international high technology company on the future. During a fast moving multimedia presentation, which included virtual reality, videoconferencing, Internet television, Cyberbanking, and a host of other related technologies, I bugged one of the participants. Right under their noses - as a demonstration in a country where such a demonstration of surveillance was legal. Even as they watched me pace around them, one of them was now carrying a minute transmitter capable of being picked up half a mile away. The device would have landed up being carried into the next meeting or the hotel bedroom. Devices today are so sensitive that even with a receiver the participants were unable to decide who was carrying the transmitter. Everyone could hear the sound of his or her own breathing. They were shocked.

Surveillance devices can be turned on/off from a mile away.
That means a board room will test negative when screened for surveillance devices just minutes before a vital meeting, and afterwards, although the bug may have been transmitting every word spoken during the entire course of the meeting. These kind of surveillance devices are extremely difficult to detect, requiring equipment that is complex, expensive, and time-consuming to use. In theory every room used for sensitive meetings needs a screening every time it is used. The only possible exception could be rooms that remain permanently locked except when used by a very select group of people. But a sophisticated screening to detect non-transmitting bugs may take several hours.

Remember that most commercial breaches of security are created by staff themselves who agree to betray their own companies for money.

And just in case you were still under the delusion that a swept room is secure, devices are available using lasers which allow someone to listen to a conversation taking place half a mile away using equipment operating at that distance. Laser light reflects off window glass, carrying with it vibrations from noise inside the room.

Then there are the cameras.
A high quality colour video camera operating in bright or dim light can now be squeezed into a screw head. The centre of a Phillips screw is more than large enough to contain the lens of such a camera, which can therefore be concealed in any light switch, or any area of any room where a Phillips screw head is visible.

Networking means that every word spoken in one room in Australia can be heard in precise detail in any other country of the world day and night, using local telephone calls and Internet encryption.

So what happens to privacy?
Privacy died a long time ago. In some countries use of concealed transmitters is against the law yet these things are widely available for decreasing cost. When it comes — say — to mergers or acquisitions, or other price sensitive market information, a single phrase may acquire a commercial value of several million dollars all more. Thus theft of “words spoken” has become one of the highest value crimes that can possibly be committed. We urgently need international agreement that covert electronic surveillance is illegal except for enforcing law and order. The sale of these devices should be banned in every nation - they can all be bought in the UK with total freedom. The market will still be there but it will send a clear message.

So how can you protect yourself?
Firstly, you should assume that whatever room you are using is insecure unless otherwise proven. You should also assume that participants in meetings may occasionally be wired themselves, and that participants leaving a room in the course of a meeting may be hearing every word said after they have left. It’s the oldest trick in the book. Regard with suspicion any small gift that the donor might expect you to keep in your office, or put in your pocket. Examples included expensive pens, paper weights or any other object. Strangely enough, a meeting in a restaurant which is busy and noisy could actually turn out to be safer than your own boardroom or videoconference suite.

Don’t believe consumer reports – they can’t predict the future. Consumer reports only tell us about today. They tell us only a limited amount about tomorrow. Customers usually know even less about the future than the executives who have paid to ask them. Consumer reports are always history, relating to past products and services. Of course they are useful to read before going out and spending a load of money, and are a way of listening into community gossip about what is going on in the market place, but they have limitations.

Many companies are using results of consumer reports and market research. They will not survive long in the new millennium because they are relying on late 1990s or early 2000s surveys to plan third millennial products and services. They will land up with the wrong products, designed for consumers who no longer exist.

Most people see the future as more of the same: faster computers, better cars, more TV channels. They can’t see the big picture - how life itself will change.

A classic example is aircraft design. In the mid 1990s airlines such as British Airways asked business fliers what they wanted and they said good food and wine, comfortable seats, more video choices and personal screens. Hardly anyone mentioned data sockets on satellite phones, and even fewer asked for power supplies in arm rests so they could use PCs without clusters of spare batteries. Now these things are regarded as number one essentials for any world class airline - but it’s too late. They won’t be widely available on BA flights until well into the next millennium.

This was a hugely expensive mistake. According to Primex, makers of 82% of all in-seat power systems, installation costs $1,000 a seat, but after delivery there is an additional cost of up to $1,000 a day per seat in lost revenue while aircraft are sitting in a hanger. Today British Airways has business seats offering data phone sockets to frustrated and angry executives with dead portables.

Those with longer range vision have won a competitive advantage. Over 1,700 aircraft world-wide already have in-seat power, not one owned by BA. Delta introduced it in 1996 and is rapidly extending this across its fleet. Lufthansa has power in all new first class seats and is upgrading business class. But American Airlines is leading them all after a delayed start. Retrofitting is complete on all its Airbus aircraft. Power will soon be available on all business class and half their economy seats. Code-sharing airlines are now under pressure to make sure travellers stepping out of a powered seat with one partner airline can continue their journey with the same facilities.

So what went wrong? Airline chiefs trusted consumer reports and market research and lost sight of the future. Fundamental changes were taking place in three areas. E-mail replaced fax and people began to expect near-instant answers. Last minute interactive presentations on PowerPoint replaced dusty overheads. Heavier flying schedules meant that many executives were forced to give up in-flight leisure time to catch up on work. Laptops appeared everywhere in departure lounges and during flights.

There is nothing more annoying than being forced to stop urgent work less than three hours into a seven hour flight. What’s the point of a data socket when you have no power? Instant access to e-mail is absolutely essential in a world where responding in an hour can make all the difference between signing or losing a multimillion pound deal. It also means you can get vital reports out of the plane seconds after completion at 33,000 feet.

The trouble is that behaviour is changing far faster than lead times for new products and services, and the gap is getting worse. That means consumer reports will be even more useless for future-casting beyond 2000 than it has been over the last decade.

Another example where consumer reports got the future wrong is banking. In 1996 most CEOs of large banks dismissed the Internet as an irrelevance, a plaything of enthusiasts with no real impact on future profitability. Consumer reports and market opinion polls strongly confirmed their scepticism. The overwhelming majority of customers said they weren’t interested in using the Internet to run their bank accounts.

But since when have the general public been experts in global technology and financial services trends? How could they possibly be expected to form an opinion about web banking when most still doubted their need to be on-line?

Time and again we see this institutional blindness, compounded by dangerously misleading survey results. Two years later many account holders were already buying goods and services over the net. They changed their minds faster than consumer reports predicted, and as a direct result banks are struggling to catch up. But it’s already far too late for some, as non-banking competitors race ahead with a wide range of well developed digital products and alliances.

Another example has been the London Liffe Market alliance with Frankfurt announced in July, precipitated by the sudden loss of the Bund contract. British soundings from the market had suggested that London’s position would be reasonably secure, although with strong competitive pressures. Then came Frankfurt’s new electronic trading system and dealers rapidly changed their minds, switching business almost overnight and leaving Liffe so vulnerable that the only way to survive was to combine into a new “LonFurt” exchange.

General Paul Arlman, Chairman of the Federation of European Stock Exchanges says the new alliance is so powerful that it “will have an impact on the entire European market”, possibly leading to one European Exchange. This whole process has been precipitated by many factors, but one was undoubtedly the failure by London to recognise that polls don’t predict the future. People change their minds when they catch a taste of tomorrow.

So what’s the answer? The next decade will see mega-shifts as we turn our backs on a previous decade’s values, as well as on a whole century and a millennium. Every decade has its character, music, fashion, architecture and culture. The 60s, 70s, and 80s were unique and distinct. Each a reaction against the past. But the 2000s is not just another decade nor the 21st century just another century. These mega-changes in habits and attitudes will defeat companies that have based early 2000s products on late 1990s consumer views.

Survivors will be future-thinkers: companies that see six months to two years further than competitors. That means early warning systems, able to distinguish a faint blip on the horizon from background noise. It means taking a bigger, wider view, an integrated approach. It means parallel planning, preparing for fast response to a variety of outcomes.

Companies need visionary leadership, management skills are not enough. What’s the point of managing people and products superbly well but in the wrong direction? Visionaries in large organisations are often marginalised because by definition they are constantly challenging assumptions about the future. But a board without vision is a dead board. Find those with vision, give them a voice. Bring in fresh independent vision from outside to protect against corporate blindness.

So then is there any point in consumer reports at all? Listening to consumers will always be very important, to understand shorter term issues that need addressing now. Changes in survey results over time also give a valuable indication of trend. Market research are vital to fine-tune existing services, but as we have seen, over-reliance is deadly.

Author: Dr Patrick Dixon

Patrick Dixon is director of Global Change Ltd, and author of Futurewise – Six Faces of Global Change, published on 26th October by Harper Collins £16-99.