Chapter summary
Impact of corporate governance on strategy
What is How is corporate What impact does
corporate governance achieved ownership have on
governance? across the world? corporate governance?
Definition of corporate Principles or rules? The role of the investor
governance • Principles: • Insider systems: small numbers
• 'The system by which – Broad principles of large shareholders; family
organisations are directed and – Comply or explain ownership; more expensive
controlled' – Deviations require disclosure • Outsider systems: eg stock
• 11 Core principles: and explanation market; strong systems to
– Integrity – Requires investors to make counter the agency problem
– Fairness an informed decision • Institutional investors: strategic
– Judgement • Rules: focus; possible short-term
– Independence – Compliance is required interest; can influence strategy
– Scepticism – Pass or fail – no middle of their investment by close
– Transparency ground involvement
– Probity – Requires a third party or
– Responsibility regulator to enforce the rules Disclosures and reporting
– Accountability
– Innovation • Organisational
– Reputation Different jurisdictions • CSR and business ethics
• Corporate governance in the • Annual reports
UK (principles-based)
Regulatory guidance
• USA Sarbanes- Oxley Act Public sector and third sector
• OECD (governments) (rules-based) governance
• OECD principles: • South Africa – King Report
– Ensuring the basis for an • Purposes and objectives of
• Singapore Code
effective corporate private sector, public sector;
governance framework charitable institutions;
– The rights and equitable Board responsibilities QuANGOs Performance and
treatment of shareholders • Effectiveness of boards: ownership
and key ownership functions – Entrepreneurial leadership • Agency and public sector
– Institutional investors, stock – Strategy organisations
markets, and other – Briefing, training and • Levels of public sector
intermediaries appraisals organisation
– Disclosure and transparency – Membership: size and • Strategy, objectives, leadership
– The responsibilities of the diversity and governance
board • Leadership CEO vs chair • Democratic control, political
– Sustainability and resilience • Unitary and multi-tier boards influence and public sector
• Leaving the board policy implementation
• ICGN (companies):
– Board role and
responsibilities Board support mechanisms
– Leadership and
independence • Committees: Audit;
– Composition and Nomination; Remuneration;
appointment Risk
– Corporate culture • NEDs: Strategy; scrutiny; risk;
– Risk oversight people
– Remuneration • Remuneration: balance across
– Reporting and audit package; accountability for
– Shareholder rights results; market factors
• Limitations of international
codes
90 Strategic Business Leader (SBL)