Strategy and Practice 8 - Corporate Governance

From Wikireedia
Jump to: navigation, search

Governance - Stakeholder analysis- stresses the importance of all the parties CSR - Corp;s have a responsibility to all their stakeholders. It in not charity contributions - much more than that

Lip Service - Enron's CSR, or Tobacco's social reports

CSR standards - triuple bottopm line. People Planning Profit

Business Case for CSR - Balanced Scorecard, Deming's 14 points

  • HR - Retention and recruitment
  • Brand differentiation Body Shop Virgin
  • Attention diversion - BP //Its a start//

Criticism - Friedman and Jensen Orgs should maximize profitability or it is merely utilitarian. There is no accepted criteria of what governance should mean and no accepted measures - subjective

Challenge -

    • corporate law - prohibited from entering an activity that would reduce profit. Id shareholders interests are not protected then there are no shareholders
    • Principal-agent issue - who has the real power

!!Issues Firms are ignoring the true cost of business - Environmental costs - //Carbon//taxes

  • Regulation is the only way to control orgs
  • Modern capitalism has increased welfare, mortality and health throu the use of free markets
  • Investment in 3rd world countries has increased prosperity
  • creating barriers will increase monopolies profits for some

!!Governance in the Uk and effectively of the board

  • cadbury, Greenbury, Turnbill, Higgs(capstone), Smith - focus on self regulation - accepted stds
  • Are the stds truly adhered to or is it a tick the box task
  • Remuneration committees, stk options, independent directors and board nominating committees have had had little direct impact on levels of pay and women on boards and duality of CEO and Chairman and performance
  • understanding the difference between //formal// and //real// roles of the board - c
  • over dominance of members of the board - individual shareholders atomized
  • narrow focus - on operational issues
  • lack of information

!!Continental model - Stakeholders theory

  • greater role for stakeholders
  • blurred lines of responsbility
  • Boards are independent
  • Shareholders are active
  • dual boards - owners and employees
  • difficult to fire has caused rigidities

!!US model / UK model

  • depends on what you are looking at - SOX, SEC v tightly regulated - flight to UK for listing or private equity
  • economic optimization
  • focus on ethics
  • Natwest 3
  • Directors not always independent
  • Shareholder power is low / passive behaviour


!!role of the board

  • Initiates and shape strategy
  • provide overview, check , risk assessment of strategy developed elsewhere
  • Porras - Board is the glue - is ther characyter and culture of the org
  • RBV - knows what the orgs capabilities are and ensures they are in place to support the purpose

Evidence - 80% of all ideas approved by board but some evidence the boards can stop if not initiate projects

!!Measures or peformance

  • balanced scorecard
  • Turnbills identification of risks including
    • Strategic
    • Operational
    • Compliance
    • liquidity
    • Financial

!!articles Barrier- The crisis in corporate governance - Its the tone at the top that is important rather than the success or otherwise oif the regulations Unfortunately accounting is a rules based profession. as you write rules people find creative ways around them ie. Enron's SPE's UK and US difference of emphasis - US approach is to focus to the precise definition of the rule as it relates to a transaction- The UK approach is to look at the true nature of the transaction itself to determine its compliance. On the other hand Auditors say they need rules to enforce with Orgs

Tread the road between building confidence in the system by having a level playing field and over tight regulation that stifles creativity

!!Agency v Principal - some prescriptions and results

  • Give managers stock..............................................Result: Cash and Run
  • Split CEO and Chair...............................................Result: no effect
  • Create audit cmmttees...........................................Result: No effect
  • De-diversify...........................................................Result: some positive progress - endodgenous
Personal tools
Namespaces

Variants
Actions
Navigation
Toolbox