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Cultures of Change and Versatile Leaders: Are
They Recipes for Good Governance and
Sustainability?
Geetha A. Rubasundram, University of Malaya, Kuala Lumpur, Malaysia
Governance is a mechanism to ensure an organisation achieves its goals efficiently and effectively.
Governance can only be successfully implemented if the culture and environment is genuine. This
research builds on the belief that a genuine intent to be transparent, matched with voluntary and
quality reporting, will subsequently lead to sustainability.
This research analyses the three-tier relationship between firm, country, and global institution
characteristics in relation to good governance and sustainability. Two significant factors revealed
during the research include culture and the role of global institutions, providing an insight on the
differences noted between governance models.
Using a mixed method to analyse secondary data, the results reflect an interesting contrast of East
meets West. The first level of analysis compared 400 international firms that had been recognized for
best reporting practices. Firms from five countries were noticeably more frequent, Sweden, United
Kingdom (UK), Germany, France and Japan. Some similarities were noted; all five are developed
countries, and had in the last five years reviewed their Corporate Governance Codes. All five
countries were also part of the Organisation for Economic Cooperation and Development (OECD),
and had also revised its Principles of Corporate Governance in 2015.
The contrast between the cultures is remarkable, reflecting that varieties in culture can influence the
type of governance and sustainability achieved. This is further impacted by the relationship between
the global institution (OECD) and the member countries.
Keywords: OECD, Governance, Culture, Sustainability, Corruption
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The opinions expressed and arguments employed herein are solely those of the authors and do not
necessarily reflect the official views of the OECD or of its member countries.
This document and any map included herein are without prejudice to the status of or sovereignty over
any territory, to the delimitation of international frontiers and boundaries and to the name of any
territory, city or area.
This paper was submitted as part of a competitive call for papers on integrity, anti-corruption and
inclusive growth in the context of the 2017 OECD Global Anti-Corruption & Integrity Forum.
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1.0 Introduction
Governance is an old concept, withstanding the tests of time in which it has developed and enhanced
its mechanism to remain relevant. In its purest form, governance is a self-improving mechanism to
enhance accountability, transparency, and trust whilst achieving stated goals (OECD, 2015).
However, the common public perception implies that it is a checklist of conformance and constraint,
rather than a mechanism for performance and growth (Cohen et al, 2004).
Although there are many known definitions of Governance from the shareholder – management
(principal – agent theory) perspective, or providers of finance or stakeholders etc.; they seem limited
in scope and may not encompass the holistic viewpoint required by modern day business. Corporate
Governance can be described as “the structures, processes, and institutions within and around
organizations that allocate power and resource control among participants” (Davis, 2005). However,
this raises the question of what comprises an institution? North (1991) defines institutions as any form
of constraint that human beings devise to structure political, economic and social interaction.
Subsequently, North (1994) viewed institutions as the rules of the game, whilst firms and
organisations are the player. UN (2007) classifies governance into political or public governance
(public sector), economic governance (private sector), and social governance (civil, non for profit or a
system of values and beliefs), consistent with North’s (1991) definition of institution. The three
components could form an interactive and possibly complementary institutional mechanism to
promote development from all angles. It could also be seen as a constraint, which is in line with the
current perception of the “checklist” or “institution” mindset. Davis (2005) extends the sociology
literature to include a perspective on networks, power and culture. In order to assess this wide angle
from a practical viewpoint, it is necessary to understand the various models and their respective
environments.
2.0 Corporate Governance
The three popular types of Corporate Governance models are the Anglo – Saxon, Continental Europe
and Japanese governance models. The Anglo-Saxon, or market-centered system is present prevalently
in the UK and US. The Anglo-Saxon system is characterized by dispersed ownership and control.
Agency problem arises within this system due to conflicts of interest between owners and
management as the latter could indulge in self-interest behavior as long as the market price goes along
with their behavior. Many researchers have discussed the similarities of the Continental Europe and
Japanese models due to the parallels of being bank based and stakeholder oriented. The Continental
Europe and Japanese model has a relatively high concentration of both ownership and control,
reducing the principal-agent conflicts with the presence of several large shareholders. However, it
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may extend the potential conflict between minority shareholders and large shareholders (Garanina and
Kaikova, 2016).
In recent years, researchers have been analysing possible hybridization of corporate governance
models and codes due to the growing diversity of corporate governance practices within national
systems (Jackson and Moerke (2005); Garanina and Kaikova, 2016). Regardless of the Anglo-Saxon,
Continental Europe and Japanese models or the hybrid models, there have been sufficient cases of
both success and failures to provide vague results of what constitutes key success factors.
Several studies have demonstrated that country-level or national data influence governance practices
much more than firm or industry-level data, with differences arising from the various historical,
traditional and cultural contexts (Doige, Karolyi, & Stutlz (2004); Daniel et al (2012) and UN
(2007)). This is consistent with the general belief that there should not be a “ one size fits all” type of
governance. OECD (2015) acknowledges this flexibility in the G20 / OECD Principles of Corporate
Governance.
Culture operates to motivate and justify action consistent with its values through its impact on policies
and on the values of individual actors (Schwartz, 2004) that forms part of the definition of social
governance and institutions. Research on social institutions show that country level culture is a key
contributor towards good governance. Rasiah (2011) found that institutions are influencers that
condition the conduct of individuals, firms and organisations; while some institutions directly share
the behavior of individuals and firm’s, collective action problems are viewed through organisations,
networks and other groupings.
Roland (2004) distinguishes between fast moving (e.g. political institutions) and slow moving
institutions (e.g. culture). The same research proposes that slow moving institutions are good
candidates to influence fast moving institutions, since they change slowly and continuously yet create
pressures for change. Many researches have used secondary data from Hofstede, Globe (Daniel et al,
2012), or Trompernaars, which are mainly outdated. The researchers justify that cultures remain the
same over a period of time regardless of technology and global changes. However, this may seem
illogical due to the impact of globalization, the movement of cultures and changes in legislation,
leaders, and regulatory organisations.
The proposed interaction of the three components (political, social and economic) provides a basis to
justify Roland’s (2004) perspective that it may not be logical to distinguish institutions and cultures as
fundamentally different causal mechanisms to explain growth and development, including corporate
governance.
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However, the question remains on what could possibly be a consistent driver of governance,
regardless of the variations available. Since the analysis of firms, industries and countries has not
produced consistent results, the motivation maybe higher, as in from global governance institutions
and its mechanisms of change.
2.1 Global Governance Institutions
Global institutions provide a platform to unite countries across the world. Key powerful multilateral
(non – hierarchical) institutions are the OECD, United Nations (UN), International Monetary Fund
(IMF) and World Bank. These institutions are influential enough to provide the basis of power,
network and culture. However, these institutions would need to work together with governments of
countries to ensure accountability. Weiss and Wilkinson (2014) show that the separation of
governance and government removes the factors of agency and accountability. When integrated,
there is a shared purpose, which when teamed with the voluntary global institutions, provides a more
accountable solution.
The mechanism of the OECD somewhat captures this relationship between governance, governments
and volunteerism; and network, power and culture. Ever since its formation in 1961, the OECD has
sought the cooperation of its members to follow the code of conduct for its policies laid out. Unlike
other multilateral economic institutions, the OECD does not have extensive legal or financial
mechanisms to promote policies that induce compliance. Instead, regular monitoring of the member
countries via multilateral surveillance is carried out, using peer review. Due to frequent discussions,
there is better understanding of the concerns and interdependence of national policies of the member
states. This enhances the appreciation and trust amongst members to promote changes, whilst taking
into account the variety of cultural and national factors that will lead to good governance and
sustainability.
This relationship is accentuated in the review of the Corporate Governance principles that was carried
out by the OECD Corporate Governance Committee, G20 countries, OECD Member countries and
experts from key international institutions, such as the Basel Committee, the FSB, and the World
Bank Group (OECD, 2015).
2.2 Good Governance and Sustainability
Governance and sustainability with their varied definitions, would also impact the ultimate
measurement of what constitutes good governance and sustainable performance. This would be
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discussed further under the dimensions of firm, country and globe.
2.2.1 Firm Level
Cohen et al (2004) described that one of the most important functions of Corporate Governance is to
ensure the quality of the financial reporting process and recommends a more comprehensive
framework that should consider all major stakeholders. The quality of the report needs to be improved
in order to provide more value added information to the stakeholders.
Although the broadening of accountability and reporting has already begun among organisations, such
initiatives are reported with no coherence to organisations’ long-term objectives, and are often
presented as unconnected activities undertaken by organisations and in separate reports, such as
annual reports and sustainability reports (Abeysekara, 2013). Being able to articulate the strategy and
business model, as well as link metrics to them, is critical for an organisation to build trust (OECD,
2015).
Recent emphasis has been on the integration of ethical, social, environmental and economic, or
sustainability issues within corporate reports. This has been referred to as ‘triple bottom line’ or
‘sustainability reporting’ or Environmental, Social and Governance (ESG) reporting. The movement
towards integrating these issues in reporting is evidenced by the publication of more comprehensive
corporate sustainability reports supported by guidelines, such as those of the Global Reporting
Initiative (Adams & Frost, 2008), and subsequently, the inclusion in the Integrated Reporting
Framework.
However, it has been acknowledged that an organization can only achieve the highest level of
governance and recognized financial reporting quality with the right culture and tone at the top.
Therefore, it can be summarized that a more voluntary attitude, could warrant such a view.
2.2.2. Country and Global Institution Level
The OECD (2006) and UN (2007) characterize good governance through features, such as
participation, transparency, accountability, rule of law effectiveness and equity. Researchers, who
have assessed governance as a social institution, focus on the rule of law, absence of corruption and
transparency as the primary mediators of development. These principles are the central tenets in
international institutions’ policies on “good governance” and “empowerment”(Licht et al, 2007). At
the country level, a frequent measurement used is the World Bank’s Worldwide Governance
Indicator.
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Sustainability at the global or country level differs from that of a corporation. Sustainable
development meets the needs of the present generation without compromising the ability of future
generations to meet their own needs. A sustainable country is committed to fully ensuring the freedom
of its citizens, invests in their personal development and welfare (education, healthcare, wealth), is
respectful towards the environment and is reliable in terms of international responsibilities and
commitments.
From 2016–2030, a new set of 17 Sustainable Development Goals (SDGs) have become the UN’s
global political agenda. The SDGs are not legally binding goals, but merely political goals. They will
only be achieved if civil society and citizens are effective in putting pressure on their own
governments to pursue these goals. The SDGs should serve as leverage for politics to pursue a better
economic and social model. (Kroll, 2015).
3.0 Methodology and Data
In order to specifically set the flow of the paper, it is crucial to discuss the methodology and initial
results to locate the firm, country, institution relationship. This is an exploratory research, using
secondary data from various sources in order to assess the possible factors that affect good
governance and sustainability. The data has been extracted from reliable sources like World Bank,
UN and OECD.
3.1 Firm Level
A key outcome of good governance at the firm level includes best reporting practices as per
accounting and reporting standards. This research analysed the country origins of 400 firms that were
recognized for the quality of their Annual Reports, using the Best Report List - 2015 from
ReportWatch. The submission of the Annual Reports is on a purely voluntary basis to the
ReportWatch committee. ReportWatch was created in 1996 and is often regarded as the most
comprehensive, international and authoritative survey on annual reports. The analysis of the 400
companies revealed 32 countries, out of which 27 countries were eliminated due to a frequency of
lesser than 5%. The remaining 5 countries, which constituted 52% of the 400 firms were then
analysed further.
3.2 Country Level
The second part of the analysis is mixed. Qualitative research using secondary data from reports and
codes relating to the five countries since 1996 -2015 was analysed to understand the changes that have
taken place, in terms of governance codes, culture and global institution leadership role. A
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quantitative analysis on secondary reports and data was analysed to identify the impact of culture and
leadership on sustainability and good governance indicators.
3.3 Culture
This research uses the indicators proposed by Hofstede to operationalize culture. Hofstede (2010)
analysed a large database of IBM employee’s value scores collected between 1967 and 1973.
Although Hofstede is considered outdated and there has been many critics of the research, it is
relevant to this research since it removes the biasness that could come with company level culture and
focuses more on the country level culture, since the research was IBM employee focused. The
indicators include:-
Power Distance (PD) - The extent to which the less powerful members of institutions and
organisations in a country expect and accept that power is distributed unequally.
Individualism (IN)- The degree of interdependence a society maintains among its members,
differentiating between a “Collectivist” society which is more group oriented, in comparison
to the “Individualist” societies where individuals are more focused on theirs and their
immediate family’s wellbeing.
Masculinity (MAS)- A masculine high score indicates that the society will be driven by
competition, achievement and success, with success being defined by the winner / best in
field – a value system that starts in school and continues throughout organisational life. A low
score (Feminine) denotes the dominant values in society are caring for others and quality of
life. A Feminine society is one where quality of life is the sign of success and standing out
from the crowd is not admirable.
Uncertainty Avoidance (UAI) - Measures the level of threat felt by members of a culture
when facing ambiguous or unknown situations, and the beliefs and institutions that have been
created to try to avoid these situations.
Long Term Orientation (LTO) – Compares normative societies (lower scoring) and pragmatic
(higher scoring) in terms of preference of tradition and change. Normative societies prefer to
maintain traditions and view change with suspicion. Pragmatic societies encourage change
and use education to prepare for the future.
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Indulgence (IND) – Compares weak control (Indulgence) and strong control (Restraint) of
desires and impulses based on the upbringing.
3.4 Good Governance and Sustainability
3.4.1 Good Governance Index
Good governance is assessed using the indicators from the UN Worldwide Governance Indicators.
The Worldwide Governance Indicators project (Kaufmann, 2008) uses the following of six
dimensions of governance from 1996 - 2014:
Voice and Accountability (VA)– measuring political, civil and human rights
Political Stability and Absence of Violence/Terrorism (PSAVT) - measuring the likelihood of
violent threats to/or changes in government, including terrorism.
Government Effectiveness (GE)- measuring the competence of the bureaucracy and the
quality of public service delivery
Regulatory Quality (RQ)- measuring the incidence of market-unfriendly policies
Rule of Law (RoL) - measuring the quality of contract enforcement, the police, and the
courts, as well as the likelihood of crime and violence.
Control of Corruption (CoC)- measuring the exercise of public power for private gain.
3.4.2 Sustainability
3.4.2.1 Sustainable Development Index
The SDG index is based on the 17 SDG goals and 34 indicators as reported in the Bertelsmann
Stiftung – UN Sustainable Development Solutions Network report. Key points have been extracted
for the purpose of comparison.
3.4.2.2 Economic Growth
The GDP (USD million) and GDP per capita was used to assess economic growth from the
Aggregate National Accounts, SNA 2008 (or SNA 1993) for the GDP and GDP per capita.
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4.0 Findings and Discussion
The top five (5) countries in frequency that made it to the top 400 Best Report List is UK (14%),
Germany (10%), Sweden (10%), France (9%) and Japan (9%). All five countries are members of the
OECD and are developed countries. UK, Germany, France and Sweden were part of the original
member countries in 1961, with Japan joining three years later in 1964.
4.1 Culture
This sections discussion is based on Figure 1: Culture Dimensions. A significant highlight of the
analysis, reflected two extremes in culture; “East meets West” where Sweden and Japan showed
significant extremes in culture. Hence, the discussion in the next parts would focus more on the Japan
- Sweden comparison, and will only highlight significant areas of the other three countries where
relevant. The interpretation of the results have been taken in context of the Hofstede study, and
applied to the countries relevant environment.
4.1.1 Japan – Sweden Comparison
Japan (95) is the highest amongst the five countries for (MAS). Masculinity is reflected in their drive
for excellence and their noted workaholism. Because of the mild collectivism (IN), individuals do not
assert themselves and competition is noted between groups. This also reflects the challenges faced by
women to climb the corporate ladders. The launch of “Womenomics” in 2013 by Prime Minister
Shinzo Abe aims to increase the participation of women in the Japan workforce. However, this is yet
to be seen as successful since Japan performs particularly poorly on gender equality and the
empowerment of women and girls as per the SDG Index. Sweden (5) is a highly Feminine society.
This reflects the focus on work – life balance and an expectation for the quality of life. The Swedes
also value equality and solidarity, with a participative style of decision-making. This is consistent
with the IN score (71), The employer/employee relationship is contract based and for mutual
advantage, with rewards based on merit.
Japan’s high UAI (92) indicates good planning skills, in order to be prepared for any situation. This
seems logical especially for a country prone to disasters. Details of structure, planning and
development are important to create certainty and being well informed. Sweden (29) is more relaxed
in ambiguous situations. Rules are minimal, and are continuously monitored for its relevance and
advantage. Because of this, deviances are tolerated and managed. Hard work is undertaken when
necessary and innovation is not seen as threatening.
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Japans’ PD (54) reflects a borderline hierarchical society, reflecting elements of meritocracy. The
Japanese education system motivates the belief that individuals are born equal, and ambitions can be
achieved with hard work. However, the hierarchical effect is reflected in the slow, multi leveled
decision-making process practiced in many organisations in Japan.
Swedens’ PD (31) reflect the view that inequalities should be minimalized. Communication is direct
and participative, with decentralization and lesser level of control. Leadership is challenged to show
expertise. Sweden’s low score is consistent with its known level of citizen engagement, high ambition
levels and international solidarity, which are contributions to why Sweden was ranked as the Most
Sustainable Country in the World for 2015 according to the Country Sustainability Ranking.
The LTO for Japan (88) indicates a pragmatic society, with an ability to adapt easily, yet guided by
virtue and perseverance. Corporate Japans LTO is reflected in the constantly high rate of investment
in R&D even in economically difficult times and a priority of sustainability over profitability, in order
to maintain stakeholders and society for generations. Sweden (53) does not seem to express a
preference for the LTO.
4.1.2 France, Germany & UK highlights
France (68) is the highest of the five countries for PD. This reflects the acceptance of privileges due to
ranks or backgrounds. However, with the corruption allegations against the ex-French President’s -
Jacques Chirac (2000) and Nicolas Sarkozy detention over allegations on insider information (2014)
and inquiries on illegal donations made to Sarkozy’s 2007 election campaign, it reflects the French
culture change in accepting privileges due to rank.
The French combination of a high score on PD (68) and IN (71) is rather unique, since it may denote
the opposite of the direct communication expected. Subordinates may reject formal obedience
requirements, or causing communication barriers such as evidenced by the employer – trade union
relationships. Strikes, revolts and revolutions maybe a norm. Expectations of a strong leader especially
in a time of crisis, is contrasted with the expectation for the strong leader to make way for a weaker
leader once the crisis is over. The French seem to prefer and depend on the central government,
looking at them as benevolent fathers. France had many demonstrations during this period, for
example demonstrations rebelling against elections and government privatization plans (2002), trade
unions strikes against proposed labour, pension and welfare reforms (2005), new youth employment
laws (2006), planned cuts for pay and jobs, and reform of pension benefits (2007), union led protests
against government plans to raise retirement age to 62 (2010).
Germany (35) and UK (35) PD score reflect the view that inequalities should be minimalized. The
Hofstede research indicated a lower PD index amongst the higher class as compared to the working
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class in UK that exposes one of the inherent inequality tensions in the UK, between the importance of
birth rank and effort/ambition. This is an interesting concept as the failure to deal with inequality
issues is one of the key weaknesses of the UK SDG Index.
Germany (66) and UK (66) are masculine societies. Performance is highly valued, and the perception
“people live to work” relates to their self-esteem extraction and status based on success, hence making
them highly ambitious. France scores 86 and Germany 65 for UAI. In combination with the Germans
low PD (35), Germans prefer to compensate for their higher UAI since their accountability is not
covered by their boss; by strongly relying on expertise. Like the Germans, the French also have a
strong need for laws. However, due to a higher PD (68), there may not be an obligation to follow the
rules.
UK UAI (35) shows a more relaxed and lesser rules in UK society, but those that are there are
adhered to. Although UK MAS (66) reflects an ambitious society, there could be an issue with the
follow through or planning due to low UAI
Figure 1: Culture Dimensions Source
Source: Hofstede (2001)
4.3 OECD impact on country level legislations
The OECD has provided a strong platform, motivating changes in its member countries. A key
example is the impact of the OECD Recommendation on the Tax Deductibility of Bribes to Foreign
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Officials in 1996; and the subsequent Recommendation on Combating Bribery in International
Business Transactions adopted on 23 May 1997.
Many countries had legalized bribery related expenses prior to this. Example, Germany and France
had previously allowed bribery related expenses to be tax deductible and subsequently had changed
their legislations to disallow the expenses. Subsequently, the five countries also had amended their
laws to support the move to combat bribery.
Japans’ tax laws were amended to expressly deny the tax deductibility of bribes to domestic and
foreign public officials (in force as of 1 April 2006). The Swedish Parliament adopted a bill explicitly
denying the deductibility of bribes and other illicit payments on 25 March 1999 via the Municipal
Income Tax Act, which was abolished and replaced by the Income Tax Act on 1 January 2000.
The UK Finance Act 2002 extends the applicability of Section 577A Income and Corporation Taxes
Act 1988 to payments that take place wholly outside the UK. The amended legislation provides that
tax relief shall not be available in respect of any payment made in any part or outside the UK "where
the making of a corresponding payment in any part of the UK would constitute a criminal offence in
UK".
The French Parliament passed legislation (article 39-1 of the French Tax Code) denying the tax
deductibility of bribes to foreign public officials on 29 December 1997 as part of the Corrective
Finance Bill.
The German tax law prior to March 1999, allowed bribery related expenses with the exception that if
either the briber or the recipient had been subject to criminal penalties or criminal proceedings which
were discontinued on the basis of a discretionary decision by the prosecution. The new legislation
adopted on 24 March 1999 deleted these procedural conditions and denied the tax deductibility of
bribes.
All five countries had revised their Corporate Governance codes in recent years; Japan (2015),
Sweden (2016), UK (2014), France (2013) and German (2015). All are on a “comply or explain”
basis. Revisions are carried out as deemed required to ensure it remains current, with a focus on
stakeholder or sustainable value creation or transparency basis. Four out of the five countries fall
within the category of the Continental-Japan model with the exception of UK, which follows the
Anglo-Saxon model.
The updated OECD governance principles in 2015 have a proven record as the international reference
point, being adopted as one of the Financial Stability Board’s Key Standards and used for World
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Bank Groups review (OECD, 2015). However, taking into account, that all the five countries had also
updated their codes within similar periods, reflect their cohesion in terms of thoughts and culture.
Other instruments include the OECD Guidelines for Multinational Enterprises, the Convention on
Combating Bribery of Foreign Public Officials in International Business Transactions, the UN
Guiding Principles on Business and Human Rights, and the ILO Declaration on Fundamental
Principles and Rights at Work, all of which are reflected in the OECD Corporate Governance
Principles (OECD, 2015).
4.5 Good Governance
The results are analysed from Figures 2 to 7 below. Sweden reports the best results for VA, PSAVT,
GE, RoL and CoC, only loosing out to UK in terms of RQ. Although Japan scores the lowest for VA,
GE, RQ, RoL and CoC, it scores second in PSAVT. Japan reports a significant improvement in GE
(19.22%), RQ (15.18%) and CoC (10.52%).
All five countries recorded a drop in their PSAVT scores: UK (-21.11%), France (-19.49%), Germany
(-14.72%), Sweden (-12.69%) and Japan (-2.39%). UK’s sharp drop of 18% begin in 2002. There is
some volatility noted in the trends over the years, especially for Germany, France and UK.
Figure 2: Voice & Accountability
Source: Worldwide Governance Indicators (1996 – 2014)
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Figure 3: Political Stability and Absence of Violence/Terrorism
Source: Worldwide Governance Indicators (1996 – 2014)
Figure 4: Government Effectiveness
Source: Worldwide Governance Indicators (1996 – 2014)
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Figure 5: Regulatory Quality
Source: Worldwide Governance Indicators (1996 – 2014)
Figure 6: Rule of Law
Source: Worldwide Governance Indicators (1996 – 2014)
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Figure 7 : Control of Corruption
Source: Worldwide Governance Indicators (1996 – 2014)
4.6 Sustainability
4.6.1. SDG Index
Sweden is ranked 1st out of 34 OECD member countries. Sweden ranks high for its action to combat
climate change, with lower greenhouse gas emissions per GDP compared to any other OECD country.
It also leads with 45% of female representation in parliament. Surprisingly, Sweden scores average
with upper secondary completion with a lower education score based on PISA.
Germany ranks sixth in the SDG Index. Germany ranks as one of the top countries in promoting
economic growth and employment, and is known as Europe’s economic powerhouse. Germany’s
commitment to conservation of terrestrial ecosystems and biodiversity is high, however tempered by
its lower rank in the protection of animals. Germans are exposed to high air pollution as well.
France ranks 10th and is among the top ten active countries in combating climate change. France has
taken strong steps to end poverty, with good results for health. It has one of the lowest scores for
education, which requires significant policy action that ensures education opportunities are not limited
by socio- economic status.
Japan is ranked 13th and is the top in six indicators including sustainable consumption and production
patterns, healthy life expectancy and education.
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UK ranks 15th in the index. It is commended for its air quality and wastewater treatment, with
criticisms for renewable energy as well failing to adequately tackle inequality. It also has an alarming
rate of obesity.
4.6.2. Economic Indicators
GDP (USD million) shows Japan in the lead by a huge gap consistently from 1996 to 2015. However,
this is in contrast with GDP – Total USD / capita where Japan is the lowest of the five countries,
although with a smaller margin. The GDP performance is remarkable considering that the economy
entered a severe recession in 1997 and an economic crisis in 2008 onwards. Japan was then overtaken
by China as the world’s second largest economy. Sweden has the highest when it comes to the GDP
per capita but lowest for GDP. However, a comparison of the % change from 1996 to 2015, showed a
growth of almost double for Sweden, in comparison with Japan.
Germany seems to be consistent in its increasing performance of both the GDP per capita and GDP.
This is consistent with the results in the SDG Index of it being a growing economic powerhouse. In
terms of GDP and GDP per capita, UK and France are closely ranked.
Figure 8: Gross Domestic Product – Total USD / capita (1996 – 2015)
Source: Aggregate National Accounts, SNA 2008 (or SNA 1993)
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Figure 9: Gross Domestic Product (GDP) Million US Dollars (1996 -2015)
Source: Aggregate National Accounts, SNA 2008 (or SNA 1993)
5.0. Discussion
All five countries are different in terms of culture, especially Sweden and Japan, which reflects an
East meets West notion. The culture contrast is also reflected in the type of sustainability and
governance element achieved.
In terms of GDP (USD Million), Japan leads with a huge margin, with Sweden being the bottom of
the five countries list. This reverses with the GDP per capita, where Sweden is top and Japan is at the
bottom. This is consistent with Sweden’s low PD Score, contributing to its level of citizen
engagement and fair practises. Though Japan may take on changes at slower pace due to its high UAI,
the MAS side would push the society to achieve the said goals in line with its noted workaholism.
Sweden’s performance in the WGI is consistent with its Most Sustainable country. Japan’s notable
performance in education also concurs with its PD, UAI and MAS scores. Schneider and De Meyer
(1991) concurs with the above by discussing Japanese approach to strategy as evolutionary, emerging
and adaptive to environmental conditions, in comparison to the European and American approach of
strategic planning. This indicates that the Japanese manage uncertainty by matching it by trying to
understand it, rather than by reducing it as done in Western cultures.
Germany’s MAS, UAI and LTO are similar to Japan, which could explain the similarities in the
Governance Codes. UK would need to be cautious due to the downward trends noted in many of the
governance components. Its high MAS matched with the UAI reflect the possibility of ambition of not
being achieved due to the lack of follow through. This could explain the reasons behind its lower
performance in the SDG Index and WGI. UK’s PD results reflect inequality in class due to birthright,
0
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Germany
Japan
Sweden
UK
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which is mirrored in the SDG Index.
Changes in culture are apparent with the motivation of the OECD. This was especially noted with the
changes in anti bribery tax law changes. The French change in culture in relation to its acceptance of
inequalities is also noted, with its trend in the CoC, as well as its strong attempts to reduce poverty in
the SDG index. Japan’s push towards the inclusion of women’s role in the economy reflects its
changing cultural preferences. However, these changes were also noted during World War, where
Japanese women took on dominant roles when the men were sent to war. Therefore, it could be
implied that cultures could possibly revert back to its origins, without the continuous influence of the
global institution. Daniel et al (2012) demonstrated that the national economic culture influences
corporate governance practises through the mediation of the institutional environment.
6.0 Conclusion
Culture plays a significant role in setting the path for country level policies and the type of
sustainability and governance achievement. However, with the involvement of global institutions like
OECD and its mechanism that involves country leaders for discussions and peer reviews, it is possible
for cultures to transform as evidenced by Japan’s initiatives for education and women, as well as
France anti-corruption action.
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