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19th Century

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					   CORPORATE
  GOVERNANCE
TRENDS IN THE 21 st

    CENTURY

      PRESENTED
           BY
    MERVYN E KING S.C.
1. Era of entrepreneur
 19th Century – first half 20th Century
2. Era of professional manager
 Post war – to last decade of 20th Century
3. Wealthy Families to World War II
 Institutions conduit
4. Shareowner revolution
 Institutions needed to get back in control
 Unhappy with management
 Remedy only to sell shares?
 Governance guidelines developed
5. 21st century is era of corporate governance.
   Can we in 21st Century?
Continue shareowner dominance to the
 exclusion of other stakeholders ?
Have financial focus only ?
Ignore the changed world ?
Human rights, environment, e-commerce
Have backward looking financial
 measurements only ?
Perform but not conform ?
Not be a responsible corporate citizen ?
                   Trends

Exclusive / Inclusive
Accountable / Responsible
Non financial aspects
Shareowner activism
Conform / Perform
Risk Management
Sustainability.
     Exclusive / Inclusive

Inclusive recognizes CCES
Contractual & non contractual
Purpose
Value
Identify stakeholders
Strategy combine all three
Reciprocal relationships
E.g. – parcel delivery service.
 Accountable/Responsible
Liable to render account

Liable to be called to account

                  Common law      To Whom ?
Accountablity    Statute         How ?


                  Changed world   To whom ?
Responsibility   Activism         How ?



Accountable to everyone – no one.
    Non financial aspects
Financial focus 19th & 20th centuries
Backward looking
Changed world
Forward looking approach
Scorecard approach – information at a
 glance
Measurements for sustained success.
      Non financial aspects
Examples of non financial aspects:
Innovation
Learning and training
Reciprocal relationships with stakeholders
Management credibility
How incentivise talent & attract talent
Technology
Licence to operate check
Conformance aspects.
      Shareowner Activism
Era of deference gone
Institutions visit companies
Measure good governance
SEE factors
Guidelines for investment
Animal Cruelty League – Huntingdon
Comparex, Primedia & OTK.
       Conform / Perform
     Importance of Conformance:

McKinsey – Institutional investors
Pay more for good governance
Premium differs by country
Borderless world
Quality of information
Capital a scarce resource
“Capital will flow elsewhere”.
     Conform / Perform
               Balance:

Conform - constraint on managers

But business success essential

Performance while conforming

Balance for success and sustainability.
Risk Management:
•   Risk for reward
•   The risk accepted in business objective
•   Uncertain future events
•   Identify them
•   Some prudent some not
•   Mitigation plan
•   Appetite for risk
•   Pursue opportunities with greater
    confidence.
Sustainability:

• Development that meets the needs of the
  present without compromising the ability
  of future generations to meet their own
  needs.
    Integrated Sustainability
           Reporting
• Social, economic and environmental
• Triple bottom line - Shell
• Stakeholder Relations
• Ethical Practices
• Safety, Health and the Environment (SHE)
• Social and Transformation Issues (including
  Black Economic Empowerment)
• Human Capital.
             Four Pillars

Fairness

Accountability

Responsibility

Transparency.
Board responsibilities under
  Inclusive Approach (A)
Purpose, values, stakeholders
Strategy for all three
Implementation and monitor
Financial aspects
KRA’s, and KPI’s – risk management
Going concern
Human resources – appointments,
 succession, morale etc.
Board responsibilities under
  Inclusive Approach (B)
Effective communication – internal &
 external
Internal controls & MIS
Licence to operate check
Non financial aspects – sustainability
Accountable & responsible
Perform but conform – balance.
  How to carry all this out?

Survey –studied corporate law –
 stakeholders
One-minute manager – Ken Blanchard
One-minute governor
Four questions, two guidelines and one
 foundation.
  How to carry all this out?
       Question one:

Is there any conflict?
Personal or immediate family
No interest
Disclose & vote or recuse from voting
Conflict leads to deceit by omission and/or
 commission.
 How to carry all this out?
      Question two:

Do I have all the facts to enable me to
 make a decision?
Objectively speaking
Past prejudices & present needs
Facts not assumptions.
  How to carry all this out?
     Question three:

It this a rational decision based on all the
 facts?
Risk and reward
Time might show wrong decision
Legal microscope years later
Law reports – 50% winners & 50% losers.
  How to carry all this out?
      Question four:

Is the decision in the best interests of the
 company?

Long term rather than short term.
          Guideline one:


Transparent communication & reporting
Substance over form
Negatives & positives
Non financial aspects
Prompt – no surprises.
         Guideline two:

The board must ensure that the company
 acts in a socially responsible manner
Good corporate citizen
Non discriminatory
Non exploitative
Safety, health, environment
Ethics.
            Foundation:
Integrity
Honesty in business is the first chapter of
 the book of commercial wisdom
A commentary on the times in which we
 now live is that “honesty” is often
 preceded by the phrase “old fashioned”
The moral world like the physical world is
 not exempt from the law of ceaseless
 change
Intellectual honesty is, however,
 immutable
Independence of directors.
            A Company:
Driver of industrial revolution
A privilege
Driver of capitalism as we know it today
Inanimate, immortal but needs directions
 from natural individuals
Good Corp Gov starts and ends in
 boardroom & executive’s offices
Self regulatory system
Each morning puts a corporation on trial &
 each evening passes judgment on it.
            A Company:
The director is the heart, mind and soul of
 that corporate citizen – look to person on
 the right of you
An awesome responsibility
But a privileged role – cherish it and carry
 it out with dignity, hard work and
 intellectual honesty.

				
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