Aligning Governance Interests for the Long Haul

As many as 93 percent of CEOs surveyed say sustainability is essential to their company's future success. At the same time, they recognize "an implementation gap in meeting their ambition to embed sustainability deep and wide within their organizations". To bridge this gap, there is one factor of overriding importance: a firm's corporate governance model. In this article, the author draws on several pieces of research on United States firms in polluting industries to present ways in which companies can adapt their corporate governance models at three levels: ownership, board of directors and management. Improving one's social and environmental performance depends less on regulatory compliance, he says, than it does on aligning the interests of the firm's owners or managers with the composition and diversity of its board and its approach to executive compensation. Above all, a long-term time horizon and uninterrupted commitment are required to build a more sustainable future for generations to come.