Defence of the realm

A timely reminder recently in the House of Commons of the importance of corporate governance and the tensions that currently surround it. MPs were debating the importance of ESG in the defence industry.

Absolutely right that defence firms should consider ESG, and absolutely right that we should protect the country. These two things can be right at one and the same time.

Labour MP Luke Akehurst summed up the confusion around ESG and defence.

“This debate is a chance to make it clear that the highest form of corporate social responsibility is for a company to be involved in the defence of the country.

“To me, it is quite bizarre that people and institutions would put the provision of proper equipment for our armed forces, or our allies who are fighting against fascism in Ukraine, in the same category for divestment as tobacco, pornography, modern slavery or forced labour. That just seems perverse.”

Much to think about there.

Thinking inside the box

Over in the other place, their lordships were also concerned with governance, but their concern was whether we should have a moratorium on “super intelligent” AI.

Baroness Neville-Jones would like one but doesn’t believe we could put one in place because, frankly, no one in the White House is going to regulate that way.

Instead, she thinks we have to look to other bodies, such as the Turing Institute, to consult on the appropriate action.

Companies too can play a role, she says. “There is also the user market, which is different; that is, companies which are employing AI for some purpose.”

She adds: “There has been an instance where an AI programme has escaped autonomously onto the internet. There are real risks.

“Therefore, corporate governance should be brought into play, and it should happen soon.

“Companies should be obliged to report both what they are doing and its uses, and it should be subject to the normal processes of audit.” Sounds a bit like the EU AI Act.

But then the kicker. “Companies in this country have not, on the whole, fared all that brilliantly when it has come to their grasp and their willingness to understand and palliate the dangers of cybersecurity.

“Take that as an example, and by it, I mean we need to be tough about getting on with ensuring that companies take proper responsibility.” That one’s going to smart among the cybersecurity buffs.

Intention seekers

It’s not just “doing good” that matters for members of the US public when they look upon corporate behaviour, but also “intent”.

The finding comes from polling conducted by boffins at business schools in France and the US.

They questioned 1,399 people and found they were willing to pay more for shares if the CEO framed decisions as “driven by concern for the environment, rather than profit maximisation”.

The academics conclude a “purely prosocial intention generates a positive ‘intention premium’.”

This, they suggest, is why “many companies downplay the business case for their sustainability initiatives and instead emphasise a prosocial intent”. Uncomfortable news for MAGA.