Corporate Governance Gets Greener
These days, corporate governance involves more than CEO pay, board membership, and shareholder voting policies. As ecological issues threaten to put shareholder returns at ever greater risk, sound environmental policies have increasingly become an integral part of any well-run company.
Monsanto strikes again
Monsanto (NYS: MON) is no stranger to controversy. Its newest scandal involves U.S. scientists' recent observation that some crop-eating bugs appear to be developing a resistance to Monsanto's genetically modified corn.
Environmentalists have long warned of the potential dangers in Monsanto's biotech products -- most notably the possibility that genetically modified organisms would spawn unforeseen environmental dangers. The evolution of pesticide-immune "super bugs" would spread destruction far beyond Monsanto's bottom line, hurting shareholders, farmers, communities, and citizens at large.
Nathaniel Parish Flannery, the author of a recent post from corporate governance researcher GMI Ratings, pointed out that Monsanto fails on many levels with regard to environmental disclosures. The company hasn't embraced best-practices policies for environmental oversight and reporting, nor has it adopted an ISO 14001 certified environmental management system. It also fails to disclose its greenhouse gas or carbon dioxide emission data.
Cleanup under way
In the spring, GMI provided data for a Forbes piece on how companies in the "dirtiest" industries could most effectively "green up" their operations.
At the time, less than one-third of the world's 4,200 biggest companies disclosed environmental performance records; less than 25% reported on greenhouse gas emissions; and less than one-fifth had revealed specific goals to reduce pollution and greenhouse gas emissions.
On a more positive note, the article highlighted authentically green 10 companies that disclose environmental data, pursue environmentally positive goals, and use globally recognized environmental management systems. These included Anheuser-Busch InBev (NYS: BUD) , Nokia (NYS: NOK) , Cemex (NYS: CX) , and PepsiCo (NYS: PEP) .
Back in May, GMI founder Bob Monks participated in a Q&A describing the evolution of corporate conduct as it moves further into the environmental, social, and governance realm, or ESG for short. He said the corporate governance field has always accounted both for how companies function internally, and how they affect the society around them.
According to Monks, the first factor took 30 years to explore. Only in the last 10 years has the field of corporate governance begun delving deeper into companies' impacts on the environment, the government, and their suppliers and customers. As corporate governance shifts its focus more fully to that second category, Monsanto's failures look all the more glaring.
Good corporate governance and corporate social responsibility will make the world a better, safer place for individual investors and individual citizens. And whether in the realm of CEO pay or environmental policy, responsible shareholders will push all companies to do the right thing.
Check back atFool.comevery Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.
At the time this article was published
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