When we talk about Basle 2, we talk about a convention, in some countries also something enshrined in law, that governs capital allocation. When we talk about money laundering, we talk about something clearly enshrined in law, which governs our due diligence, our customer management and our responsibilities to our national and initernational law enforcement authorities, when we talk about Sarbanes Oxley, we talk about our duties and practices to regulators, in particular US regulators. Finally, when we talk about Patriot, we also refer to controls on our business and our American business partners, where they can be answerable to their law enforcement authorities.

In short, the theme that conjoins all of these topics is that of answerability to an outside agency. One might have added a further theme to the list, but in a sense it is absolutely implicit in everything I have said. That is governance. Governance is the practices that a corporation or other institution applies, to involve stakeholders, those who depend on or interface with the corporate body.

My theme for this session, indeed, my message is the growing importance of corporate perception and corporate responsibility.

I would like to start by saying that perception is a two way street. The Greek philosopher said that the way up and the way down is one and the same. Well corporations who look outwards and pay attention to the way they are perceived by customers and other stakeholders, and corporations who absorb the messages emanating from the global regulators and pay heed to them will thrive. Those who shut their eyes to fast and complex changes on the world stage risk coming unstuck, and falling behind.

Compliance is the message of today’s market. But companies do not win by merely being compliant. I am sure that the outward looking corporation, the absorbent as well as reactive firm, will also respond to market place opportunities.

I am afraid that today’s culture of caution, even of threat from regulators and law enforcers around the world might give companies cause to worry. Rule by compliance is hardly a recipe for entrepreneurial activity and confident engagement with the world and the marketplace. The compliance officer challenges the executive who looks outwards and seeks to push further and in different directions. Is it not, after all, the successful companies who push at the legal niceties, who take advantage of the spaces that lawyers have overlooked or skated over. That exploitation of opportunities remains as positive and forward looking today as it has ever been. There is no place for retrenchment in today’s compliance culture.

And yet, and here is the fine line that absorbs executives concerned with strategy, and yet in today’s culture the corporate feels under greater pressure than ever before. The question for the strategist is clear: how far can we take risk, how far should we trim our sails, curtail our ambitions for fear of treading on one regulatory toe or another.

Risk taking is an invaluable and necessary part of business practice. When it succeeds it transforms the future and has long lasting beneficial effects. But failure brings with it great hazards. Those that take risks with regulatory or even statutory requirements can subject their entire organisations to considerable and incalculable danger. Regulators in today’s climate of corporate responsibility wield more clout, and have greater capability for causing a company embarrassment. Naming and shaming is now a global passion. Reputation must more than ever be protected.

So for example, those fined by the British Financial Services Authority for failures in anti-money laundering systems have suffered much more the damage to their reputations than from the relatively modest financial losses. Business is no longer performing in closets between consenting adults, it is performed in the full glare of international media, who are looking for executive mistakes and culpability.

Responding to the new wave of interest in business behaviour, Politicians likewise take more of an interest in the subject, seeing it either as a possible bandwagon on which to ride, or as a bomb waiting to explode under some corporately friendly policies. One has only to see how politicians have laid into Enron and its auditors with such a will to see how exposed corporate entities and their advisers can be. Who could have imagined the creation and passing of Sarbanes Oxley legislation in a more corporately friendly era? Who would have thought governments would be determining the nature of the corporate board or the relations it has with its advisors in the way that Sarbanes Oxley does. The prosecutors had regulators in the New York District Attorney Office or at the Securities and Exchange Board are now public figures and the cases on which they adjudicate are now public sensations. Likewise they stage manage arrets soif stock brokers in the public glare.

You might say that that is the American way of doing things. It is not ours. And here we could to one of the most fraught and complex elements of the new regulatory environment. We all deal in the dollar, we all trade with US banks and therefore we all are required to comply with Patriot, the post September 11 legislation that makes non-US companies dealing with US companies even outside the US subject to the same law as US companies themselves dealing inside the US.  This is draconian law with which many, even inside the US, have expressed displeasure. Patriot reaches into every p[art of corporate life. The sole beneficiaries have probably been the legal fraternity, the rest of the world is trying to come to terms withg its rapidly changing and widening provisions.

What is the purpose of Patriot? Its political programme is to make it harder for laundered funds to enter the economic system,. It is argued elsewhere that Patriot and other anti-money laundering legislation is designed to squeeze black money out of the offshore world, and back into the cosy arms of Mother America where it can be bear hugged by the IRS for on-shore taxes. For Sure, we hear nothing but dismay at the status and atmosphere in Cayman, which has probably worst affected of all the offshore centres.

That can probably be only good news for the likes of Dubai, where local regulation, combined with a hands-off view of business is proving an attractive home for floating money seeking  some sort of reasonable tax environment.

Now I can perhaps answer our title to this session. This said, ‘hostage to the world stage’. My view is that we should have put a question mark at the end of the statement. While business and finance undoubtedly faces much greater threats and pressures from global and national regulators, and while those pressures are undoubtedly going only to get tougher, there will always be enterprising individuals and enterprising localities and jurisdictions who will buck the trend.

There is another executive worry to add to that one? How far should top executives pry into the detailed business dealings of their colleagues down the line and  how much must they know about particular transactions or activities?