corporate governance by derek hendrikz

Introductionto Corporate Governance

© Derek Hendrikz Consulting

derekhendrikz

http://www.derekhendrikz.com/


Copyright © 2016

Derek Hendrikz Consulting

www.derekhendrikz.com



Corporate Governance…

A system of rules and practices by which organizational institutions are directed and

controlled.



Objectives of Corporate Governance…

1. Definition and distribution of rights and responsibilities

amongst participants within an organization.

2. Specification of rules for decision-making.

3. Guidance in an appropriate strategy and structure that will

facilitate the achievement of objectives.

4. Being a monitoring mechanism.

5. Alignment of stakeholder interests.



Core functions of Corporate Governance...

Strategic Direction

Compliance &

Accountability

Risk & Strategy

Monitoring



Primary drivers of Corporate Governance…

1. Membership rights and privileges provided to members

(shareholder- vs. stakeholder system).

2. Content of rights provided to members (decision-making

powers, access to information, distribution of surplus, etc.)

3. Modes of representation made available to members

(direct, indirect or ‘proxy’ representation).



External Stakeholders…

• Shareholders

• Debt Holders (holder of a bond)

• Trade Creditors

• Suppliers

• Customers

• Affected Communities© Derek Hendrikz Consulting


Internal Stakeholders…

• Board of Directors

• Executives

• Employees



Stakeholder Interest…Stakeholder: Interest:Directors, management & employees Salaries, benefits & reputation

Investors Financial returns

Lenders Specified interest payments

Returns to Equity investors Dividend distributions and capital gain of stock

Customers Certainty of provision of goods and services and appropriate quality

Suppliers Compensation for goods and services and continued trade relations



External Controls…

• Competition

• Debt covenants (company / creditor agreements on ratio limits)

• Demand for assessment of performance information (e.g. financial

statements)

• Government regulations

• Managerial labour market

• Media pressure

• Takeovers



Anglo American shareholder modelvs.

Multi Stakeholder Model



Shareholder-Oriented Stakeholder-Oriented

Maximizes shareholder value and looks after shareholder interests

Looks after all stakeholder interests, especially public

Seeks profitability and efficiency Less concerned about profit than value for money

Hard-nosed and commercial Looks for survival, long-term growth and stability



Anglo American Shareholder Model

Power belongs to the

Shareholders

Board represents that Power

Delegates

Accountable



Multi Stakeholder Model

Power belongs to the

Stakeholders

Board represents that Power

Delegates

Accountable



Shareholders

Board

Delegates Governance Powers

Stakeholders

Accountable



Strategic Responsibility…Authority Strategic Responsibility

Board• Purpose & Desired Reality• Philosophy & Theoretical Model• Accountability Rules• Strategy & Scorecard Approval

EXCO

• Strategic Objectives• Master Processes• Master Scorecard• Structure• Systems Requirement• Culture Definition

Management

• Action programmes & projects• Detailed processes & procedures• Target outputs and milestones• Performance assessment• Budgeting• Resource allocation



Board of Directors…

A body who, independently from the executive team, represents organizational

shareholders in the governance and monitoring of the organization.



Objectives of the Board…

1. To independently represent stakeholders of the

organization.

2. To provide strategic direction to the organization.

3. To oversee accountability and compliance.

4. To monitor strategy execution and risk of non-

performance.© Derek Hendrikz Consulting


Responsibility of Board…

• CEO Selection and succession

• Strategic guidance

• Compensation of senior executives

• Monitoring of financial health

• Performance and risk

• Ensuring of accountability to investors and authorities



Where Boards have failed…

• Enron• Worldcom• Adelphia Communications• AOL• Athur Andersen• Global Crossing• Tyco



Seven Principles of Good Governance…




1. Discipline




2. Transparency




3. Accountability




4. Independence




5. Responsibility




7. Social Responsibility




corporate governance by derek hendrikz

Leadership & Management