Here at CIPE we are often asked: “How does good corporate governance contribute to building functional democracies?” While I understand why good corporate governance is key, I still find it difficult to explain it in simple terms to those that question the relationship.
Today I came upon a chart put together by Philip Armstrong (now head of the Global Corporate Governance Forum) several years ago. This chart, in my view, is one of the better illustrations of how corporate governance is more than intra-company owner-management relations tool.
It clearly illustrates the relationship between internal/external stakeholders, the board of directors, management, and, most importantly, civil society. This chart captures the complex interaction between company-level governance institutions and country-level institutions. As we always say, you can’t reform a company’s behavior without also reforming the institutional climate within which it operates.