Saturday, February 04, 2006

Corporate Governance thoughts

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Tuesday, January 24, 2006

thoughts on corporate governance

A good Corporate Governance form must provide empowerment to the executive management of a company, and simultaneously create a mechanism of checks and balances . This ensures that the decision making powers vested in the executive management is not misused and fosters greater responsibility to meet stakeholder aspirations and societal expectations.
Flowing from this philosophy and core principles, Corporate Governance in a large company or a conglomerate can take place at three interlinked levels:
-Strategic supervision by the Board of Directors
-Strategic management by the Corporate Management Committee
-Executive managment by the Divisional Chief Executive assisted by the Divisional Management Committee
A company must have the right balance between freedom of management and accountability to shareholders. this can be achieved by segregating strategic supervision from strategic and executive management. The Board of Directors as trustees of the shareholders exercise strategic supervision through strategic direction and control, and seek accountability for effective strategic management from the Corporate Management Committee. The CMC has the freedom, within Board approved direction and framework, to focus its attention and energies on the strategic management of the Company. Divisional Chief Executives, assisted by the Divisional Management Committee, have adequate freedom to focus on the executive management of the divisional business.
a 3-tier governance structure thus ensures that :
(a) Strategic supervision (on behalf of the shareholders), being free from involvement in the task of strategic management of the Company, can be conducted by the Board with objectivity, thereby sharpening accountability of management.
(b) Strategic management of the Company, uncluttered by the day-to-day tasks of executive management, remains focused and energised; and
(c) Executive management of the divisional business, free from collective strategic responsibilities gets focused on enhancing the quality, efficiency and effectiveness of its business
Issues in Corporate Governance that would be useful for me to investigate this year
- Practical considerations in setting up effective governance structures. Stuff like how many people should be on the board, 'ideal composition', how many external vs internal directors etc. These are issues that all of us take as a given but don’t really delve into
-topical news issues that ican easily read about in magazine articles. Need to keep an eye out
-How can executives make the transition from management to becoming Board Members....


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