MERVYN KINGS SPEECH DELIVERED ON 3 APRIL 2008 AT A COMMERCE, LAW AND

MANAGEMENT GRADUATION
Mr Chancellor, it gives me great pleasure to present this talk this evening to the graduates in
Commerce, Law and Management. Three disciplines which will result in their being involved in or with
companies.
For 150 ears, the compan has been the chosen medium !or the pooling o! human and monetar
capital. The concept o! a compan"s limited liabilit was one o! the drivers o! the industrial revolution,
leading to its dominant position in toda"s world.
#n registration a compan becomes a person in law, separate !rom its shareholders or an o! its other
stakeholders. $n that sense it is sovereign, but it is incapacitated. $t is more incapacitated than an
un!ortunate human being that might become incapacitated o! mind as a result o! an un!ortunate
accident. The human being"s heart still !unctions and according to the great religions, the soul has not
le!t the bod. The incapacitated compan as a person has no heart, mind or soul o! its own. $ts
directors and senior e%ecutives become its heart, mind and soul.
Man o! the graduates tonight will become directors or senior e%ecutives o! companies and the will
all be under the dut to act in the best interests o! their incapacitated compan.
The compan has become integral to societ. #! the 100 largest economies in the world, 51, !rom a
gross revenue point o! view, are companies and onl &' are governments. That gives one a taste o!
the huge in!luence which these multinational companies have over communities. $t also becomes
clear wh companies are greater agents !or change toda than governments.
The other e%traordinar change in the corporate world, in which the graduates will participate, is that
the great shareholders o! these companies are no longer wealth !amilies, but !inancial institutions
and pension !unds. These pension !unds and !inancial institutions are conduits !or all the persons in
the street. (ll o! us have become the ultimate shareholders o! these great companies. This has
caused a sea)change in thinking as to how a compan should be governed. *ot onl are these
persons in the street the providers o! capital, the are also the consumers. The ordinar emploee
contributing to a pension !und has this double power + providing capital to a compan and consuming
the product or service produced b the compan. That person can elect to bu a biodegradable
detergent rather than one that is not and continues to pollute the waters o! the world.
( government"s role toda, rather than as an agent !or change, should be to promote companies in
improving the planet on which we live. ,irectors o! companies can no longer make onl short)term
decisions !or short)term gains. The have to make decisions !or the long)term, so that those that
come a!ter us are not compromised b the decisions we make toda. -hen it is realised that the
water on the planet has not increased in volume !or millions o! ears, but it is estimated that &./ o! it
toda is polluted, then the drive !or companies to assist in the reduction o! that pollution becomes
apparent. For e%ample, Coca)Cola has started a huge campaign to reccle the millions o! gallons o!
water it uses in the manu!acture o! its product. 0rocter 1 2amble"s products, which products probabl
touch the lives o! all o! us on a dail basis, are being researched and developed in order to be less
harm!ul to the planet. -hen man o! us were babies, we used towelling nappies and then came the
disposable napp or diaper. $t became a huge waste problem. 0rocter 1 2amble has spent millions
o! dollars in developing the disposable diaper.
Conse3uentl, good governance in the sense o! the 3ualit in which directors and managers steer
their companies, both short) and long)term, has become ine%tricabl intertwined with strateg and the
sustainabilit issues impacting on the business o! that compan. 4oards can no longer separate the
three aspects o! people, planet and pro!it.
5takeholders toda want !orward)looking in!ormation !rom companies to assist them in making more
in!ormed decisions on the true economic value o! a compan. To revert to Coca)Cola again + onl
1&/ o! the price o! Coca)Cola on the *ew 6ork 5tock 7%change constitutes its tangible assets or
book value. The rest is made up o! intangible assets such as its goodwill, its brand, the 3ualit o! its
management, the 3ualit o! its governance, its reputation, etc. ,irectors cannot ignore these issues.
4oards are looking at the 3uestion o! alternative dispute resolution clauses in their procurement
contracts, because business is being done in a !lat world in the sense o! concluding contracts across
a borderless world electronicall. -hat preparers o! annual !inancial statements o! companies need
to do toda is to give in!ormation so that the user will be able to assess the positive and negative
impacts which the business o! the compan has had on the economic li!e o! communit in which it has
operated and the board should be able to tell the user how the compan intends to enhance those
positive aspects and eradicate or ameliorate the negative aspects in the ear ahead.
*ot one o! us is the owner o! our planet. -e might have a title deed to a house or an apartment or
even a large tract o! land, but we are nothing more than transient caretakers. -e owe a dut to those
who come a!ter us to make the world a better place to live in than when we leave it. The impact o!
climate change has been brought home to us in the last two ears. There"s a new general awareness
b directors and senior e%ecutives o! companies that in steering a compan, both short) and long)
term, the compan"s activities have a huge impact on the planet. The current energ sources, coal
and oil, will be depleted in !i!t ears !rom now. $! companies continue to operate on the same basis
as in the past, it will lead to unsustainable outcomes. There can be no pro!it in a global sstem that
cannot endure. This would be an investment in !ailure.
(ll o! ou as graduates this evening must realise that ou are transient caretakers. 6ou will one da
become a director or an e%ecutive o! a compan. 6ou must direct that compan so that ou can sa
that m compan has made its mone as a responsible corporate citi8en. That is the critical issue
that stakeholders will be asking companies in the 91
st
Centur + not how much mone has the
compan spent on social issues.
(s directors, ou will become the heart, mind and soul o! companies and mabe o! some o! these
great companies in the world. $ urge all o! ou to remember that sustainabilit has become a critical
issue in the running o! businesses and that we all owe a dut to pla our part to tr and leave this
earth without having compromised the needs o! those who come a!ter us.
Think o! what $"ve said in the conte%t o! the !ollowing: $ncreasing public demands !or companies and
governments: to do something about climate change; to reduce the pollution o! our waters; to
reduce the use o! timber because o! the release o! o%gen into the air b trees; to improve the lives o!
& billion o! the . billion people on our planet who live in povert; to con3uer ($,5 and malaria; to
create and use alternative energ sources because we !ace oil depletion in !i!t ears. There can no
longer be a continuation o! the use o! energ sources as we have known them. 2reat companies
have to change their use o! energ sources. 7%perts believe that the ne%t big global con!lict will be in
regard to the availabilit o! unpolluted water. $n the Millennium 7cosstem (ssessment, published in
9005, it was !ound that ecosstem services are being used unsustainabl which includes !resh water,
!isheries and the air we breathe.
More and more new technologies are being developed !or energ because the use o! energ is at the
centre o! the continuation o! sustainabilit. $n a recent stud in (merica, '</ o! M4( students said
the were prepared to !orego 15/ o! anticipated earnings in order to work !or an organisation with a
reputation !or corporate social responsibilit.
$t is good business to run one"s compan as a responsible corporate citi8en. 6ou will attract a better
class o! emploee. 6ou will be able to get the support o! our stakeholders to assist ou when ou
have a downturn. 6ou will be able to raise capital more cheapl.
-e have gone through unprecedented change and we are going to go through much more change,
but the change has to be on a sustainable basis. $t cannot be on the present unsustainable basis.
-e have a world with a rising population and while the econom is growing with the spread o!
globalisation, this has caused pressure on the environment. 0eople, planet and pro!it are interrelated.
Those o! us who direct companies have a dut to ensure that we do so in a sustainable manner. $t is
the right thing to do.
-hatever role the graduates tonight pla in companies in the !uture, the have to ensure that the
companies the direct are, and are seen to be, responsible corporate citi8ens. (s companies are the
great agents !or change, it is as responsible corporate citi8ens that the will make our planet more
sustainable + and these corporate citi8ens are dependent on their directors" heart, mind and soul.
Conse3uentl, as !uture directors, do the right thing + steer our companies on the basis o!
sustainabilit + be responsible transient caretakers.
Mervn 7 =ing 5C