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Soft Risks, Hard Lessons: using corporate governance to manage legal, ethical and reputational uncertainties

in association with The University of Cambridge
January 2004

This one-day event on corporate governance and related ethical issues featured keynote addresses by Onora O'Neill, Principal of Newnham College, Cambridge and 2002 Reith Lecturer, and Charles Fombrun, formerly professor of management at the Stern School, New York and currently executive director of the Reputation Institute.

Professor O'Neill gave a talk entitled 'Intelligent Trust and Intelligent Accountability'. She argued that the extensive use of managerial methods for accountability purposes has damaged and distracted professional cultures, and that defensiveness has come to dominate at the expense of informed judgement. Managerial conceptions of accountability have also deflected attention from the need to define the primary, substantive obligations of agents to right bearing principals. Defining accountability primarily as 'answerability', O'Neill suggested a form of more intelligent accountability grounded primarily in dialogue with right holders.

In his talk on corporate reputation and risk, Professor Fombrun argued that it is not only our society that is obsessed with celebrity: 'the star system has also happened to our companies.' The era of deregulation and liberalisation of markets fostered enormous forces of competition between companies and products, and competition for money, talent, knowledge and attention. While this has generated significant wealth creation and business growth, the more negative consequence has been a 'winner takes all' mentality in both society and business, in which all the attention is focused on a few individuals. As a result a few companies are making huge incomes while many others are barely surviving.

This was the reason for the series of business scandals over the last two years that have engulfed corporates such as Enron, Tyco, Adelphia and WorldCom. Fombrun went on to consider how reputation could be used to regulate corporate misbehaviour. Companies' reputations, he said, were valued far more by the markets than by accountants; therefore companies put a lot of emphasis on branding and marketing themselves in order to gain the support of investors.

Amongst the participants were Adrian Cadbury, father of the modern corporate governance movement, and representatives from the Foundation for Independent Directors, Reuters, accountants BDO Stoy Hayward, and The Change Partnership.

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