Topic 3 Corporate governance 2015

Corporate governance
– Intended learning outcomes
Students should be able to
 Identify different forms of corporate governance  Evaluate the influence of organisational stakeholders on a firm’s purposes and performance  Conduct stakeholder mapping

Exhibit 4.1

Influences on strategic purpose

Corporate Governance
Corporate governance refers to the influence and power of the stakeholders to control the strategic direction of the organisation (Lynch,
p.362)

The chain of corporate governance: typical reporting structures

‘Principalsagents’

Source: Adapted from David Pitt­Watson, Hermes.

Exhibit 4.2

Governance Chain - Issues
 Conflicts

of interest
 Directors’ responsibilities to shareholders
 Accountability to stakeholders
 Imperfections in governance chain



Unequal division of power
Differing access to information

 High

profile cases of fraud or poor governance > Governments sponsored committees for

reform (risk assessment, info disclosure)

Role of Governing Bodies
 Different


ownership structures

Anglo-Saxon, German, Japanese models

 Important





for international strategy

Does governance help or hinder investment / speed of investment?
Which relationships are critical?
How quickly will pay-offs be expected?

Illustration: Enron
 What

mechanisms in the governance chain should (or could) have prevented what happened at Enron?
 What changes in corporate governance are required to prevent similar occurrences?

Stakeholder Expectations
 Organisational

stakeholders are individuals or groups internal and external to the governance chain



Who have expectations and potential influence who depend on the organisation to fulfil their own goals, and on whom the organisation depends. 3 Types of external stakeholders
Market
environment

Social/political environment Technological environment Suppliers

Policy makers

Key adopters

Competitors

Regulators

Standards agencies

Distributors

Government

Owners of technology