Paradigm Shift in the Role of HR in Corporate Governance

The downfall of Enron, WorldCom, Tyco and Arthur Anderson in USA; Ahold, Mayflower and Vivendi in Europe; OneTel, HIH Insurance and Harris Scarfe in Australia; more recently Satyam in India, may all eventually become part of history. Apparently, these scandals have resulted in a crisis of trust. Histories may well be forgotten, but they are pregnant with issues which have to be attended to, by the Corporate, so as to ensure that such incidences do not occur in future. Can organizations take steps to make certain that such catastrophes do not occur? And what would be the role that HR could play in devising such “collapse prevention” strategies? It can be observed that the process of corporate governance is deeply entwined with the process of corporate failure in all the above cases. The basic purpose of Corporate Governance is to achieve a conscientious, value oriented management and control of companies. At the very soul, corporate governance regulations should promote and reinforce the confidence of existing and future shareholders, customers, employees, business partners and the general public, which in turn will ensure the sustainable growth of the organization. So the question of corporate failure and HR can be briefly rephrased as – what is the role of HR in the Corporate Governance Process? Across the HR value chain, from recruitment to career and succession planning, from training and development to reward management, HR can play a strategic role. In today’s world where the survival of organizations is important not just to the employees but the nation as whole, senior HR leaders possess a straight responsibility to shareholders and a moral responsibility to employees and it is necessary to examine how HR could effectively fulfill these responsibilities. This paper explores the potential causes behind the present crisis of trust and the challenges which HR leaders need to be aware of; and within the context of each, formulates some of the solutions that require paradigm shift from the perspective of HR leaders’ anchor role to build an ethical enterprise.