BUSINESS ETHICS & CORPORATE

GOVERNANCE

Sabina Sudan

Adjunct Associate Professor

Business Law Division
Nanyang Business School

Feb 20, 2022

Agenda

• Environment
• Corporate Governance
• Sustainability Reporting
• Risk Management
Environment and Business
We have used up Earth’s resources for the year

• Global Footprint Network study has some startling findings

• We are exhausting the Earth’s natural resources 1.8 times faster than the
planet can regenerate them
• By July 29, 2019, humans “spent” the 2019 quota for water, soil and clean air –
the Earth Overshoot Day
• This day has moved up two months over the last 20 years:
 in 1993 – Oct 21
 in 2003 - Sep 22
 in 2017 – Aug 2
 In 2018 – Aug 1, 2018
 In 2019 – Jul 29, 2019
 In 2020, it fell on August 22!
 In 2021, Earth Overshoot Day fell on July 29
• “Spending” includes deforestation, soil erosion, biodiversity loss, CO2
emissions
The UN Global Compact, 2000: Environment

• Principle 7 - Businesses should support a

precautionary approach to environmental
challenges
• Principle 8 – Businesses must undertake
initiatives to promote greater environmental
responsibility
• Principle 9 – Businesses must encourage
the development and diffusion of
environmentally friendly technologies
Biocentrism (ethics) - Wikipedia
• The term biocentrism encompasses all
environmental ethics that "extend the
status of moral object from human beings
to all living things in nature". ...
• Biocentrists observe that all species have
inherent value, and that humans are not
"superior" to other species in a moral
or ethical sense
Ethical veganism is a protected belief, rules UK judge
Times of India Jan 4, 2020 page 18

• Jordi Casamitjana worked for the League

Against Cruel Sports, an animal welfare
charity
• He raised concerns that the company’s
pension fund was being invested in firms
involved in animal testing
• Ethical veganism is a philosophical belief
• Protected under anti-discrimination laws
Bill of rights for pets aims to train humans
• Americans enjoy a Bill of Rights, and soon California pets could as well
• A bill introduced that would enshrine a dog and cat bill of rights into state
law, requiring every animal shelter and animal rescue group to post a
copy of said rights on their premises
• The bill enumerates these fundamental rights that every dog and cat in
California would have:
1. freedom from exploitation, cruelty, neglect and abuse
2. a life of comfort, free of fear and anxiety
3. daily mental stimulation and appropriate exercise
4. nutritious food, sanitary water and shelter in an appropriate and safe
environment
5. preventive and therapeutic health care
6. proper identification through tags, microchips or other humane means
7. spaying and neutering to prevent unwanted litters
Paris COP 21
Climate Change Agreement, Dec 2015
• 55 countries representing 55 per cent of global emissions were required to
sign to ratify
• Several smaller countries signed; but contributed smaller percentages
• China: 1st biggest polluter (20%); the US: 2nd biggest polluter (17.9%)
• Sept 3, 2016 – the US and China ratified in Hangzhou, China
• Oct 2, 2016 – India ratified (4th biggest polluter at 4.1%) joining 61 other
countries
• Oct 4, 2016 – 28 countries that comprise the EU ratified
• Oct 5, 2016 - 135 Parties of 197 ratified
• Nov 4, 2016 - the Paris Agreement entered into force
• Oct 15, 2019 - Russia 3rd biggest polluter at 7.5% signed - four years after it
was agreed
The U.S & the Paris Climate Change Agreement

• Jun 1, 2017: Trump decided that the U.S. will pull out of the
Paris Agreement
• Elon Musk (Tesla) and Bob Iger (Disney) resigned
immediately from the President’s advisory councils
• U.S. cities, states and companies took their own steps on
behalf of the planet in the year that followed
• The Climate Mayor initiative includes 405 municipalities that
represent 70m Americans
• More than 80 US cities including Republican ones
committed to 100% renewable energy
• Several thousand businesses – including Amazon, Levi
Strauss & Co and Google were committed to comply
The World Economic Forum
22—25 January 2019 Davos-Klosters, Switzerland
• Business leaders, members of government and entrepreneurs
from around the world meet to discuss topics that are shaping
and disrupting the global economy, currencies and markets
• These include Environmental, Social and Governance issues,
artificial intelligence and cryptocurrency - topics that will
continue to transform the broader economic landscape
• In 2018, the Forum’s Annual Meeting was certified to ISO
20121 for sustainable event management after independent
audits
• This is consistent with the Forum’s wider sustainability
strategy 2021
Biden victory ushers in ‘race to the top’ on
climate change Dec 8, 2020
• The Biden Plan for a Clean Energy Revolution and
Environmental Justice — is to recommit the United States to
the Paris Agreement on climate change, and to set a target for
the US to achieve net-zero carbon emissions by 2050
• The Biden administration is likely to hit the ground running with
orders, actions, policies and proposed regulations aligned with
the climate agenda that do not require congressional approval
• Such efforts could range from changed federal government
procurement policies to enhance renewables and biofuels to
new federal building standards and proposals to revisit major
regulations involving auto emissions, fuel standards and power
plant emissions
Global: Biden victory ushers in ‘race to the top’ on climate change

• The impact of the world’s largest economy pivoting to this new policy cannot be
understated
Countries race to the “top” for climate ambition
• In Oct – Nov 2019, China, Japan, and South Korea announced aggressive emissions
reduction targets
• China seeks to achieve net-zero emissions by 2060, while both Japan and South Korea have
set a 2050 goal for reaching net-zero emissions
• The European Union in Sept 2019 also announced a proposal to increase its climate
ambitions, with a new target of reducing emissions by at least 55% from 1990 levels by
2030, and a continued commitment to net-zero by 2050
• In 2019, the United Kingdom enshrined its net-zero by 2050 commitment into law
• On inauguration day Jan 2020, the US joined the ranks of countries that have a firm target
• These countries comprise some 2/3rds of global GDP
• The total percentage of the world’s economy where a net-zero by 2050 commitment now
applies is in fact higher, with several jurisdictions enshrining the target into law, including for
instance the United Kingdom and New Zealand
Global: Biden victory ushers in ‘race to the top’ on climate
change

Private sector ramps up climate ambition

• 2020 also saw a ratcheting-up of targets by major emitters in the private sector
• Companies from a range of sectors, including
finance, energy, transportation, consumer goods, and many others, announced
targets that meet the net-zero by 2050 goal — and often exceed them
• These measures include reaching zero-emissions and even offsetting all
emissions caused by the company in the past
• Major investment houses are also divesting from thermal coal and making
murmurs about other fossil fuels
• A careful reading of the most recent climate plans reveals that big players are
now looking closely at supply chains and procurement policies, suggesting plans
to push carbon out of the operations of their business partners
Why COVID-19 will end up harming the environment
https://www.nationalgeographic.com/science/2020/06/why-covid-19-will-end-up-harming-the-environment/

Polluters ‘bolder than ever’

• In the midst of the pandemic and resulting economic implosion, industries such as
fossil fuels, plastics, airlines, and automobiles have been scrambling for advantage.
Some governments—particularly the United States’—are acceding to companies’
pleas for cash, regulatory rollbacks, and other special favors
• “There’s a serious risk that polluters could emerge from this crisis bolder and
potentially more profitable than ever,” says Lukas Ross, a senior policy analyst at
Friends of the Earth, an advocacy group.
• The oil and gas industry has secured billions of dollars in public funds through
aggressive lobbying intended to ease the pandemic’s economic damage
• The aid includes tax changes that benefit the industry, breaks on the royalties
companies pay to drill or mine on public lands, and access to the Federal Reserve’s
$600-billion Main Street Lending program
• The fracking industry, which has been bleeding cash for years, is among those
pleading for help - a risk to the climate in propping up these failing companies and to
taxpayers who will bear the cost of bailing them out
‘Banking on Climate Change’ the Rainforest Alliance Network

• In March 2020, the Rainforest Alliance Network (RAN) released its

‘Banking on Climate Change’ report into the financing of the fossil fuel
industry by 35 private-sector banks
• The report found that since the Paris Agreement in 2016, banks,
including JPMorgan Chase, Barclays and Bank of China, had funded
US$2.7 trillion worth of fossil fuel projects
• RAN has now called for an immediate end to the financing of fossil
fuel expansion and real commitment toward the phasing out of fossil
fuel financing
• Even in the midst of the COVID-19 pandemic, reports like these are
not going unheard, with large investment groups urging companies to
maintain their attention on reducing carbon emissions, as
shareholders strive to see their investments protected against the
anticipated risks of climate change
‘Banking on Climate Change’ the Rainforest Alliance Network

• On 19 May 2020, shareholders of JP Morgan Chase, America’s largest

bank, narrowly lost a vote which saw 49.6% of investors demand that
Chase disclose the carbon emissions of all companies to which it makes
loans
• While the vote did not succeed, it has sent a strong message to climate
investors
• In Norway, the response to climate change has been even more profound
• Changes introduced by Norway’s Parliament in June 2019 mean that
Norway’s US$1 trillion wealth Fund can no longer invest in companies
that mine more than 20 million tonnes of coal per year or generate more
than 10 gigawatts of power from coal
• The Fund also excluded four Canadian oil companies for producing
excessive greenhouse emissions
• Further exclusions are expected
Singapore S$5 per tonne tax rate ‘fair amount’ to pay for greenhouse gas emissions

• Feb 19, 2018: Singapore budget announced

• Mar 2018: The Carbon Pricing Act, 2018
• 2019-2023: Initial tax of S$5 per tonne of greenhouse gas emissions
• Expected increase of between S$10 and S$15 by 2030
• The carbon tax will apply to emitters who produce 25,000 tonnes or more of
greenhouse gases in a year
• Will impact 30 to 40 of the largest emitters in the power generation, petroleum refining,
chemicals and semiconductor sectors
• These account for about 80 per cent of Singapore’s emissions
• The government has fixed the tax rate at S$ 5 per tonne to allow these companies to
implement a process to reduce emissions until the tax is increased
• 2017 report reports Singapore’s total annual greenhouse gas emissions for 2014 and
2015 at about 50 million and 51.4 million carbon dioxide-equivalent tonnes respectively
What to look out for in 2022: ST editors look
ahead to the biggest issues of the new year!
Rebuilding the economy amid recovery
• Unlike in 2020 and 2021, there will be no
outsized economic rescue packages, although
some still-troubled industries such as aviation
and tourism-related sectors will continue to
need help, at least until travel curbs are eased
Flights to Nowhere
• Singapore Airlines has cancelled its proposed
'flights to nowhere'
• Singapore Airlines has scrapped its proposed
"flights to nowhere."
• The airline had planned to launch three-hour
scenic flights that would both take off from and
land at Singapore's Changi Airport.
• 1 Oct 2020
Singapore Airlines Drops 'Flights to Nowhere' A
fter ... – Insider
Flights to Nowhere
• Teams to discuss the pros and cons
• What is your decision?
• What would you do differently?
7 minutes to discuss in teams; 8 minutes to
share in class!
SIA hiring cabin crew again after 2-year
freeze – Feb 13, 2022
• 2,829 employees lost jobs between end March 2020
– end March 2021
• 2,379 were cabin crew
• Job losses were because of closed borders and
grounded planes
• 2000 SIA staff were redeployed to the Covid-19
frontlines
• In total, 4,300 jobs were lost across SIA, Silk Air and
Scoot in Sep 2020
Back Casting?

• http://www.youtube.com/watch?v=lvfHmm
m5gi8
Singapore Airlines introduces “From Farm to Plane” initiative
Priority Magazine Jan-March 2018

• Initiative towards F&B sustainability practices

• Plan to use more sustainable and meatless
ingredients and local produce
• Support local farmers’ communities from the
airline’s destinations
• Phased introduction to be gradually increased in
all cabins
• Collaboration with Kranji Countryside Association
Saffron Coffee, Luang Prabang
30 minutes!
Ex-VP jailed 14 years for part in cheating her
company of $10 million - Sept 8, 2017
https://sg.yahoo.com/news/ex-vp-jailed-14-years-part-cheating-company-10-million-103507197.html

• Linda Lee, a 39-year-old Singaporean senior executive and four other

persons, stole S$10 million from her company over six years
• She spent her portion of almost $5 million on private homes in
Singapore and Batam, home renovations, watches & handbags, two
insurance policies and a car
• Ms. Lee has pleaded guilty to 35 cheating charges and is sentenced to
14 years in jail
• She joined the company in 2009
• Soon after, Tan Aik Gee (co accused), a manager at Ying Xin Services
who is a general contractor that had provided services to Lee’s
company, approached her and they devised a scheme to cheat her
company
Lee (contd.)

• Lee prepared false quotations for fake job requests on letterheads of various
contractors Tan gave Lee
• The job requests were submitted for properties that had sufficient or extra allocated
funds
• Due to her seniority, she was the requester, the first approving officer and the person
responsible for ensuring that a job was completed
• As Lee became more senior, she was given more responsibilities and the scale of the
cheating got bigger
• Lee’s lawyers said mitigating circumstances were that Lee came from a humble
family; cooperated with the Corrupt Practices Investigation Bureau (CPIB); and went
to the company’s auditors before she was called up by the CPIB. And that she suffers
from a mental disorder that led to the compulsive purchases of  luxury goods
• Lee’s lawyers also claimed that the Company could have had a “higher
standard of check and balance”
Shell Bukom heist: One mastermind admits to siphoning
$128m of gas oil – Feb 8, 2022
• They used various methods to evade detection for years,
leveraging their combined knowledge of Shell's internal systems
• They configured the flow of misappropriated gas oil through
carefully planned routes in the piping system and also ensured
multiple pumps and tanks were moving at the same time to mask
the misappropriation
• The bunker meter and the orientation of surveillance cameras
were tampered, and they coordinated their activities in group chats
that were subsequently deleted
• They also paid off surveyors to cover up the unauthorised
transfers
Shell Bukom heist: One mastermind admits to siphoning
$128m of gas oil – Feb 8, 2022
• In early 2015, Shell observed significant unidentified oil loss at Pulau
Bukom
• First Shell engaged a group of experts from its other offices to conduct a
technical and process review, which failed to detect the misappropriation
• In 2017, Shell engaged a global management consultancy to conduct a
five-week review; this investigation, too, was not conclusive
• Shell then engaged a global multidisciplinary team of Shell analysts to
monitor tank movements
• This team detected the unauthorized transfer of gas oil to vessels
• Shell made a police report on Aug 1, 2017
• Shell has since taken numerous measures, estimated to cost S$6 million,
to improve its systems and processes
Shell Bukom heist: One mastermind admits to siphoning
$128m of gas oil – Feb 8, 2022
• Prosecutors are seeking a jail term of 359 months - a month shy of 30 years -
for Juandi Pungot, 45, who admitted that he began embezzling gas oil from his
former employer in 2007
• The Singaporean is the first of three key players to be dealt with for his role in
the conspiracy
• He pleaded guilty to 20 charges of criminal breach of trust for misappropriating
gas oil valued at about $128 million in total between 2014 and 2018
• Juandi also pleaded guilty to six corruption charges for bribing independent
surveyors to turn a blind eye to the misappropriation, and 10 charges for
laundering his ill-gotten gains
• Juandi’s spent his share of approximately S$5.6 million on designer
watches, cars including a Mercedes Benz GLC 250, a condominium unit at
Regentville in Hougang, and properties in Bangkok and Batam
What is ‘Corporate Governance’
http://www.investopedia.com/terms/c/corporategovernance.as

• Not having controls is comparable to leaving

the front door of your house open!
• This framework for a company to attain its
objectives
• It includes every sphere of management, from
action plans and internal controls to
performance measurement and corporate
disclosure
Who is responsible for Corporate Governance?
• Management – Corporate Executive Team (CEO, CFO, Legal, Compliance,
HR) / Internal Audit / Executive Board Members)
• Non-Executive Board Members /Independent Board Members
• Chair of the Board – is the same individual the CEO and the Chair?
• External Auditors
• External Lawyers
• Consultants
• Shareholders / majority-minority / individual-institutional / dual shares
• Investors
• Suppliers
• Analysts , quarterly reporting, earnings forecast
• Governments / Regulators / Media
The Enron Fraud
https://www.youtube.com/watch?v=Mi2O1bH8pvw 4.48 minutes
Case Study
• You are the Chair/CEO of AnteeU, a publicly listed company
in Singapore
• AnteeU is in the trading business and imports and exports
grains, other commodities in the AsiaPac region
• What factors will you take into account in selecting your board
members?
• How many members on your Board?
• How long is the tenure for each director?
• How many Board Committees? Committee members?
• Why are these factors relevant?
5 minutes to discuss in groups
7 minutes in class sharing
Noble Group 2015

• For such a large board with so many independent directors, the

lack of any independent directors with strong experience in the
commodities industry is rather surprising and would lead to
questions about the ability of the board to challenge management
on the company’s business model and strategies. Further, while
many of the independent directors have international
appointments, they are all based in or closely connected, to Hong
Kong, though Noble is listed here (Singapore) and operates
globally.
http://governanceforstakeholders.com/2015/06/28/noble-should-pay-
heed-to-its-corporate-governance/
Diversity
• A study of US community banks shows that the banks that
failed had more bankers on their board of directors 
• Banks that survived had directors with diverse
backgrounds/ expertise e.g. doctors and military officers  
• This underscores the dual role of diversity
• Diverse backgrounds and cognitive styles can help unearth
issues that might be lost in homogenous group-think
• Non-experts on the Board help slow things down and raise
challenges to consensus amongst insiders
Clearfield and Tilcsik, NUS Business Beat Nov 16, 2018
Diverse boards tied to fewer financial 'irregularities,'
Canadian study finds Feb 5, 2020
Ethikos Feb 19, 2020

• California: a [2019] new law requires public companies with principal executive
offices in the state to have at least one woman on their board by the end of
2019
• This must increase to two female directors by the end of 2021
• The law has been challenged in court by a conservative group over the use of
taxpayer funds to enforce the gender quotas
• A mid 2019 survey by Institutional Shareholder Services (ISS), a proxy
advisory firm, revealed that 61% of global investors said gender diversity on
boards is an “essential” attribute of effective governance
• Norway has one of the strictest gender parity regimes, and used hard quotas
to reach 42% board diversity in 2016, according to an earlier ISS report
• Companies planning an IPO in the United States or Europe after July 1, 2020,
there must be at least one “diverse” board member, with a focus on women
Diverse boards tied to fewer financial 'irregularities,'
Canadian study finds Feb 5, 2020
Ethikos Fe 19, 2020
But it's the differing perspective, not gender that seems to matter most
• WEF 2020, all companies governed by the Canada Business
Corporations Act are required to disclose the representation on their
boards — and in senior management — of four groups:
1. Women
2. Visible minorities
3. Indigenous people
4. Persons with disabilities
• 2017 statistics in Canada tracking women on boards shows that the
boards of the majority of the more than 10,000 Canadian companies
studied — 61.2 % — were composed entirely of men. Women held
18.1 % of board seats overall
Is this a great / good Board of Directors?
• A US medical devices company valued at nearly US$10 billion
in 2015
• Board members in addition to the CEO (a Stanford University
drop out):
Former Secretaries of State Henry Kissinger and George Shultz
Former Secretary of Defence Bill Perry
Retired General James Mattis
Retired Admiral Gary Roughhead
Discussion.
If yes, why?
If no, who would you select as board members if you are the
CEO?
Theranos (2003-2018 RIP): A fallen Unicorn
• CEO – Elizabeth Holmes
• All-male board - no gender or racial diversity
• Average age of board directors was 76 years
• Diversity in expertise - military officers, senators and former cabinet
ministers
• No Director had any medical or technology experience
• Theranos/Elizabeth Holmes exposed - the underlying medical technology
did not even remotely perform as claimed
• Theranos raised more than $700 million by deceiving investors for years 
• Theranos's valuation at its hig point in 2015 was US$10 billion
• Ms. Holmes faces criminal charges for massive fraud; trial postponed to
March 2021 due to Covid
• If convicted, Ms. Holmes faces up to 20 years in prison
Singapore corporates need more innovative boards
The Business Times Nov 7, 2017

• Experts have identified five core tenets:

1. Functional expertise & skill, esp. tech expertise
2. Market experience
3. Geographic exposure
4. Tenure
5. Gender
Boards need “diversity” – counting the numbers and
“inclusiveness” – making the numbers count
New Code of Corporate Governance effective Jan 1, 2019

• The Monetary Authority of Singapore issued a revised Code of Corporate Governance

• The Revised Code replaces the 2012 Code and applies to annual reports from Jan 1,
2019
• Some provisions have moved to the Listing Rules and are now mandatory
• The provisions in the revised code that continue to be “comply or explain” require
companies to provide more detail as to their current governance with regard to the
deviations
• Independent Directors and nine-year tenures from Jan 1, 2020
• Training for first time directors
• Board must identify weaknesses in the internal control framework
• Audit committee must assure that internal audit is independent and has enough
resources
• WEF 2022, 1/3rd of the directors must be independent
Honestbee taking legal action against ex-CEO, former
director over alleged ‘numerous irregularities March 2020

• Honestbee is taking legal action against its former chief executive officer Joel Sng
and ex-director Jeffrey Wong
• Mr Sng was Honestbee CEO from March 2015 to May 2019, while Mr Wong was a
director from September 2013 to August 2019
https://www.todayonline.com/singapore/honestbee-says-it-taking-legal-action-against
-ex-ceo-director-over-alleged-numerous

• The fall of honestbee is perhaps the largest startup crisis to have unfolded in
South-east Asia's young ecosystem
• Over US$209 million in debt, the grocery delivery firm has faced scrutiny over how
it accumulated some 1,800 creditors in just four years
• Could its board members have done more to prevent the debt situation?
• Why did the startup not file its annual financial statements with the Accounting and
Corporate Regulatory Authority from 2016?
• Many questions on corporate governance have been raised
NUS CGIO
Singapore oil trader hid US$800 million of losses before collapse that stuns
lenders including HSBC, DBS
Apr 20, 2020

• Lim Oon Kuin founded the Singapore oil trader in 1963

• It grew into one of Asia’s largest suppliers of ship fuel, or bunkers
• Allegations that Hin Leong Trading failed to declare losses over the
years and sold inventories pledged as collateral for loans
• The company hid about US$800 million in losses racked up in futures
trading, suggesting a much bigger hole in its finances than thought,
according to people with knowledge of the matter
• The latest accounts of Hin Leong Trading, for the financial year ending
October 31, 2019, were audited by Deloitte & Touche LLP
• The auditor did not flag any problems, according to people familiar with
the matter
• The oil trader is said to owe almost US$4 billion to more than 20 banks
https://www.scmp.com/business/companies/article/3080622/singapore-oi
l-trader-hid-us800-million-losses-collapse-stuns
Singapore Code of Corporate Governance
• Mar 21, 2001: Code issued; reviewed May 2004; revised July 14,
2005
• Sep 1, 2007:  Monetary Authority of Singapore and SGX got oversight
• May 2, 2012: Revised code superseded prior Code
• Compliance with Code was not mandatory
• However, listed companies must disclose corporate governance
practices under the Singapore Exchange Listing Rules or explain
deviations in their annual reports
• Jan 16, 2018: Consultation paper circulated to obtain feedback on
recommendations to revise the Code of Corporate Governance
• Recommendations with a view to support sustained corporate
performance and innovation, and strengthen investor confidence in
Singapore’s capital markets
Big 4 auditors face sting of scams in the UK
Mail Today Nov 24, 2018 Page 23

• 2016: BHS (retail); the Financial Reporting Council fined PwC

6.5 mn for auditing failures in 2014
• Jan 2018: Carillion (construction) went bust; KPMG facing an
enquiry
• Patisserie Valerie (café chain); Grand Thorton being
investigated
• Conflict of interest? Auditing and Consulting
• Investors want reassurance of one of the “Big 4”
• Jan 2018: SEBI banned 11 PwC affiliates for Satyam scandal
• KPMG banned from auditing firms in South Africa
UK, Audit Firms & Conflicts of Interest
ETCFO Feb 14, 2019

• As of 2018, the Big Four dominate 97% of the UK audit market

• Consulting pays more than Audit
• Jan 2018: accounting scandal at construction contractor
Carillion
• Nov 2018: KPMG announced it would separate the two
functions
• Jan 2019: PwC and EY announced that they too would not
offer advisory or consulting services to their audit clients in the
UK
• Deloitte wait and watch as of Feb 14, 2019
Thomas Cook Collapse Sep 2019
https://www.ft.com/content/dfd5703a-2363-11ea-b8a1-584213ee7b2b Jan 29, 2020

Lucrative consulting fees pose a threat to

audit independence
In 2019, non audit revenue was:
81% for Deloitte
78 % for PwC’s (e.g. advisory work)
77 % for EY
66 % for KPMG
When corporate governance?
Mak Yuen Teen, Ass Prof NUS Business School.
The Business Beat: NUS Business School in the News Nov 29, 2019

• "I think too many fall into the trap of thinking that
corporate governance is only important after a
company is listed and there are public shareholders.
It is true that corporate governance priorities evolve
over a company's life cycle but getting the right
people in to constructively challenge ideas and
provide advice, and putting in place basic policies
and controls, should start from an early stage."
Elon Musk Tweets Cost Him Tesla Chairmanship And (Maybe) A Submissive
Board
https://www.forbes.com/sites/alanohnsman/2018/09/30/mr-musks-wild-ride-costs-him-tesla-chairmanship-and-maybe-a-subm
issive-board/#11e62f8a6852

• Tweeted about taking the company private

• SEC initiated an investigation; charged Tesla for not having
disclosure controls
• Tesla paid a US$20 million fine to the SEC
• Elon Musk paid a US$ 20 million fine
• Elon Musk stepped down as Chair of the Board and can't be
re-elected as Chair for three years
• Tesla must add two independent board directors to balance
the membership that had included Musk’s brother and long-
time investors and friends
Good directors and bad behavior
https://cb.hbsp.harvard.edu/cbmp/pl/71164742/71164875/07e15fede29ac694f3af0eca9f3
d5e3c

Question: Why do good people do bad things?

• Obedience to authority
• Conformity bias
• Loss aversion
• Over confidence
• Self serving bias
• Moral license / rationalization
• Power corrupts (Bathsheba Syndrome)
• The (not so triple) bottom line
© sabzsudan@eclsconsults.com
Risk factors
Taking Stock of Asia’s Corporate Scandals, July 21, 2016, Nikkei Asian Review

• Majority of Board insiders

• Cross share holding arrangements
• Business partners and banks are “friendly
stakeholders”
• Lack of shareholder activism
• Majority of shares owned by a small number of
large investors
• Seeing corporate governance as a “cost”
Dual Class Shares
A dual class stock is the issuing of various types
of shares by a single company. ... The class offered to the
general public has limited voting rights, while the class
available to founders and executives has more voting
power and often provides for majority control of the
company. Investopedia
• Founders and some shareholders have higher voting
rights and/or dividends than others
• Allows founders to focus on a long-term strategy
• Google, Facebook prefer a dual-class share structure –
gives the company more control with less shares
To dual? Or not to dual?
Cons Controls

Voting Some fund managers and Allow minority to have more say in
corporate governance appointing independent board
activists disapprove as it directors
does not follow the "one
share, one vote" principle

Minority Minority shareholders’ Educate investors

rights are not protected

Decision Fewer voting rights for Fiduciary duties on shareholders

Making minority means less
control
Dual Class Shares / Weighted Voting Rights

• US and Europe allow

• Bid to attract high tech start up
• Measures being explored to protect minority investors,
such as efforts to enhance the independence of
independent directors
• Include an enhanced voting process that gives non-
controlling shareholders greater say in the appointment
of independent directors
• June 2018: SGX allowed the listing of companies with
dual class shares
What regulators want!

• “good corporate citizenship”:

• (i) having an effective compliance program
• (ii) self-reporting wrongdoing
• (iii) cooperating with government
investigations
• (iv) remedying past misconduct.
12.30-1.30: Lunch!
Team presentations

• Sustainability Reporting
• Risk Management
Sustainability Reporting
Why report?
• Regulators
• Investors
• Consumers
• Activists
• Employees
• Peer companies
• Other industries
• Media
Improved Disclosure for Shareholders
• We believe that all investors, along with regulators, insurers, and the
public, need a clearer picture of how companies are managing
sustainability-related questions. This data should extend beyond
climate to questions around how each company serves its full set of
stakeholders, such as the diversity of its workforce, the sustainability
of its supply chain, or how well it protects its customers’ data. Each
company’s prospects for growth are inextricable from its ability to
operate sustainably and serve its full set of stakeholders.
• Important progress improving disclosure has already been made –
and many companies already do an exemplary job of integrating and
reporting on sustainability – but we need to achieve more widespread
and standardized adoption. 
• https://www.blackrock.com/corporate/investor-relations/larry-fin
k-ceo-letter
Larry Fink's Chairman's Letter to
Shareholders | BlackRock May 29, 2020
• Last year BlackRock voted against or withheld votes from 4,800
directors at 2,700 different companies. Where we feel companies
and boards are not producing effective sustainability disclosures
or implementing frameworks for managing these issues, we will
hold board members accountable. Given the groundwork we have
already laid engaging on disclosure, and the growing investment
risks surrounding sustainability, we will be increasingly disposed
to vote against management and board directors when companies
are not making sufficient progress on sustainability-related
disclosures and the business practices and plans underlying them.
The Pros of Sustainability Reporting
• Competitive advantage
• Benefits financial outcomes for the company
• Attracts capital, investments, consumers, talent
• Improves relationships with communities, regulators
• Sets goals and Key Performance Indicators help drive
success
• Shareholder value
• Avoids fines, penalties
• Reputational advantage
• Reduces waste – paper, electricity, bandwidth
• Risk management
The Cons of Sustainability Reporting
• Still an evolving field
• Not mandatory in most countries
• Multiple sustainability reporting guidelines
• Different criteria from different reporting entities, hard to compare between
industry peers or between different industries (compare and contrast with
Generally Accepted Accounting Principles (GAAP) standards for financial
reporting)
• Information provided may be hard to quantify or verify
• SME bandwidth / resources
• Data can be presented with a “spin”
• Auditing standards need to be defined
• Activist reaction
• Negative media coverage
• Reporting may divert from the actual underlying activity
May 23, 2013: Global Reporting Initiative G4
Guidelines: A Five-Minute Guide – Ian Buckland
http://corporate-citizenship.com/2013/05/23/global-reporting-initiative-g4-guidelines-a-five-minute-guide/

Principles based approach:

• Stakeholder Inclusiveness
• Sustainability Context
• Materiality
• Completeness
• Balance
• Comparability
• Accuracy
• Timeliness
• Completeness
• Clarity
Integrated Reporting
• Integrated reporting is one step further – about communicating,
how the company manages its long-term value creation by taking an
integrated approach to both traditional risks and these wider
sustainability risks
• Instead of reporting on financial performance and sustainability
performance separately, or even within the same report, Integrated
Reporting intends to show how the company integrates
environmental & social thinking into its business
• So for example, an integrated report goes beyond financial,
employee, environmental and social data, to also demonstrate how
the company integrates these broader risks and opportunities into its
long-term strategy, into its risk management, into operating policies
and procedures, and what the trade offs between these issues are
https://paiaconsulting.com.sg/what-is-the-difference-between-sustainability-reporting-integrated-reporting/
ENVIRONMENTAL PROFIT AND LOSS ACCOUNT – PUMA
HTTP://ABOUT.PUMA.COM/EN/SUSTAINABILITY/ENVIRONMENT/ENVIRONMENTAL-PROFIT-AND-LOSS-ACCO
UNT
• PUMA Supplier Factory in Vietnam
• In 2011, PUMA was the 1st company ever to establish an Environmental Profit &
Loss Account (EP&L)
 WHAT IS THIS?
• Our operations and supply chain depend on nature for services such as fresh water,
clean air, healthy biodiversity and productive land. The PUMA E P&L is the first
attempt to measure the immense value of these services to our business, and the
true costs of our business’s impacts on nature by placing a monetary value on them
along our entire value chain.
• After the widely recognized launch of the first EP&L by PUMA in 2011 and the
publication of an EP&L for selected products in 2012, the year 2013 marked the start
of the next chapter of the corporate EP&L. For this, PUMA works closely together with
its French parent company Kering, who has taken on the ambitious aim to establish a
group wide EP&L. The first E P&L on a group level has now been published.
For complete information on Kering's E P&L, please visit the link: http://www.kering.com/en/sustainability/epl
• Chouinard, Y., Ellison, J. & Ridgeway, R. The Sustainable Economy. Harvard Business Review, 89(10): 52-62.
https://hbr.org/2011/10/the-sustainable-economy
FTI Consulting Inaugural Corporate Sustainability Report

•https://www.fticonsulting.com/insights/reports/corporate-sustainability-report-2020?
utm_source=eloqua&utm_medium=email&utm_campaign=
usa-cc-nov-08-2021-ipwarming
(Pages 1-28, remaining pages optional)
FTI Consulting Inaugural Corporate Sustainability Report
Risk Appetite

72
What is Risk Appetite?

• No individual / entity can avoid risk and therefore must prepare to

minimize the consequences when risks occur
• How do you manage risks that your organization faces in its day to
day operations
• What steps do individuals and entities take to prevent / mitigate the
risks identified?
• Appointment of “Risk Managers” as the lead to identify a strategy to
manage risk?
• A Risk Management Committee?
• Does the Committee meet periodically to review and monitor risks,
and ensure prevention, mitigation and corrective actions are relevant?
Evolution of Risk Management
• Junior staff to senior leadership - C suites, Executive
Teams
• Holistic versus fragmented approach
• Increased reporting - annual reports, regulatory filings,
social media, sustainability reports, integrated reports
• Stakeholder pressure
• Linked to compensation
• Compliance departments, risk managers
• Governance and CSR team
• Risk talent with gravitas, multiple skill sets
Risk Mapping exercise

High
Impact

Low

Low High

Likelihood
Risk Mapping – In Class Exercise
Team 1: Vaccines in Japan
Team 2: Manufacturing Personal Protective Equipment in Malaysia
Team 3: Manufacturing ventilators in India
Team 4: Self driving cars in Germany
Team 5: Online retail in the US
Team 6: Food delivery in Singapore
Team 7: Apparel in Vietnam
Map five risks of potential illegal or unethical conduct that could arise in your
industry / geography due to the Covid19 pandemic
•Do not list natural disasters (hurricanes, earthquakes etc.) or political risks that
are in your circle of concern
•Each risk must be analyzed in terms of likelihood and impact
8 minutes to discuss in assigned groups
7 minutes in class sharing
ERM and Sustainability:
Together On The Road Ahead, Strategic Finance
Beasley and Showalter Mar 1, 2015

• Does a company’s strategy link risk management to sustainability?

• If yes, how?
• Is the strategy itself sustainable? Or a one off?
• Do the risk managers or drivers of CSR (if they are not also business
leaders) meet with the business leaders to combine strategy?
Coca Cola
• 2009 - launched its 2020 Vision to double its revenues to $60 billion by 2020
• Triggered several critical sustainability question - will there be sufficient
global access to water? other key ingredients?
• One result was that the company reduced the water used to produce a liter
of product from 2.7 liters in 2004 to 2.08 in 2013—a 23% improvement over
nine years
Simple Framework!

• Mackay: Try to do what is right, not what is

the most convenient
• Mackay’s Moral: If truth stands in your way,
you are headed in the wrong direction.
Ethikos Weekly Editor's Picks Nov 21, 2017

• Be the change you seek! Mahatma Gandhi

Fair Play Denmark and Iran 2003
• In a game between Denmark and Iran, an Iranian player
mistook a whistle from the crowd as being the referee’s half-
time signal and picked the ball up with his hands in the
penalty area
• The referee gave Denmark a penalty kick, but following
consultation with national team coach Morten Olsen, team
captain Morten Wieghorst missed the penalty on purpose as
a token of fair play
• Denmark lost 1–0
• Wieghorst received an Olympic Committee fair play award
https://www.youtube.com/watch?v=bpwmdoRKer0 44 seconds
The art of the dumpling: Lessons from Din Tai Fung
Brian Hwarng, Ass Prof, Dept of Decision Sciences, NUS Business School - 28 September 2016

• One of the most successful international brands in Asian dining 

• 1972 – opened the first restaurant in Taipei
• 2016 - expanded to more than 100 restaurants in 12 countries 
1. Cherish your reputation
2. Focus on consistency
CEO Yang Jinhua puts little emphasis on sales turnover as a mark of performance
Customer expectations always take priority over profits
Daily sales targets and turnover are used only as a reference to prepare ingredients and schedule
manpower
Continued success depends on emphasizing quality at every level
3. Approach business as you would family
Employees
Suppliers - close ties with its suppliers and often pays more than its counterparts for ingredients
4. Value service staff
More than 50% of revenue goes to staff training, benefits and pay that are among the highest in the
industry
Staff are required to keep a daily work log, not to monitor sales or targets but to serve as a basis
for company-wide learning and continuous improvement

12/18/2018 © sabzsudan@eclsconsults.com
Ethics as a strategy
Paine, L. S., R. Deshpandé, and J. D. Margolis: A global leader’s guide to managing
business conduct. Harvard Business Review. Sep:2-7. W1109A-PDF-ENG 2011

• Global standards – safety, quality, ethics

• Manage / measure business conduct the same way you
manage innovation, quality and revenues – with data
and tools
• Applies to you and your supply chain
• Gap in perception between senior and junior
management
• Make field visits; meet customers, suppliers, regulators
• Reward positive behavior (as you reward sales)
Make the Ethics/Compliance culture FUN!

https://www.youtube.com/watch?gl=SG&hl=
en-GB&v=2lXh2n0aPyw
Piano stairs - TheFunTheory.com -
Rolighetsteorin.se
Take Home Company Project: 40% (Team)
Presenting Team Topic Reviewing Team
Team 1 ABAC Team 4 (Environment)
Team 2 Human Rights Team 5
(Corporate Governance)
Team 3 Labor Team 7
(Risk Management)
Team 4 Environment Team 6
(Sustainability Reporting)
Team 5 Corporate Governance Team 2
(Human Rights)
Team 6 Sustainability Reporting Team 1 (ABAC)

Team 7 Risk Management Team 3 (Labor)

5.15-5.30 Team Activity

• Every team please submit five takeaways

from the module by 5.30pm today!
• Email it to me at
sabzsudan@eclsconsults.com
• Thanks!
• May the force be with you!
Questions / Comments