Reputation is everything

Ultimately, it is the board's role in establishing the vision, values, culture and strategy that will determine the appropriate framework for managing risks and setting tolerance boundaries.

If a board does not ensure that significant risks to the organisation are identified and controlled, so that exposures are acceptable and opportunities exploited, the board is failing in its primary fiduciary duty to investors.

Despite the reputation of Australian farming products, the AWB board, for instance, faces the charge of not fully safeguarding its reputation.

The importance of the prudent and supervisory role of Australian organisational boards, with their independent members operating as the conscience of the organisation, ensuring there is some internal accountability, cannot be overstated.

A clear set of values and principles that are consistently translated into corporate strategies and communicated by competent managers may prevent damaging scandals.

Values and principles in themselves do not guarantee superior financial performances.

However, the board and its chief executive may hopefully not only create a competitive edge by appealing to the ethical values intrinsic in a good reputation in this increasingly scrutinised business world, they may also create an important and useful insurance policy for the shareholders in the process.