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THE BOARDROOM INSTITUTE
GRADUATE SCHOOL OF GOVERNANCE & LEADERSHIP
COMPANY DIRECTORSHIP PROGRAMME (CDP)
LEVEL 1
PROFESSIONAL CERTIFICATE IN COMPANY DIRECTORSHIP
MODULE 1 – ENTERPRISE GOVERNANCE
MODULE 2 – FINANCIAL GOVERNANCE
RESOURCE PERSON – PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
MODULE 1
THE AGENDA – ENTERPRISE GOVERNANCE
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Enterprise Governance Architecture
Holistic view of performance and conformance
Why Corporate Governance (CG)
Corporate Governance Perspectives
Global Governance – The Crusaders of CG
CG Charter
The balance Scorecard
Determinants of Boardroom Performance
Value Creation
Conformance Views – Commonwealth Association for CG
Boardroom Evaluation and Performance Measurement
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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What is an Enterprise?
Non Commercial
NGO
Charity
Commercial
Society
incl.
Church
Public
Sector
(Govt/Public Institutions)
Partly Publicly
Owed Company
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
Private
Sector
Privately
Owned
Governance
Meaning
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To Lead
To Manage
To Run
To Direct
What?
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
A Country
An Enterprise
A Sector
A Unit
A Function
A Location / Area e.g.
District
Words Associated with Good Governance
Efficiency
Effectiveness
Accountability
Value for Money
Transparency
Success
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
ENTERPRISE GOVERNANCE BASICS
Enterprise Governance constitutes the entire accountability framework of the
organization.
ENTERPRISE GOVERNANCE – GETTING THE BALANCE RIGHT
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ENTERPRISE GOVERNANCE FRAMEWORK
ENTERPRISE GOVERNANCE
Corporate Governance
i.e. Conformance
Business Governance
i.e. Performance
Accountability
Assurance
Value Creation
Resource utilization
Source: CIMA, UK (2004)
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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Successful Enterprise Attributes
Growth
Good Citizenship
Efficient, Effective Labour Force
Reliability
Customer Satisfaction
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
Enterprise Stakeholders
Shareholders (Equity)
Customers
Employees
Regulators
Suppliers
Bankers / Financiers
Revenue Authorities
Community
Returns
Quality & Price
Reward & Job Satisfaction
Safety, Obey Rules & Regulations
Good Payers
Liquidity & Profitability
Pay the Right Taxes
CSR
Will produce your “TRIAL BALANCE”
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
HOLISTIC DEFINITION OF ENTERPRISE GOVERNANCE
INHERENT BENEFITS 
• Dual role of Board of Director
 Monitoring
 Strategy
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Role of Executive Management Team
Role of the Chairman and the CEO
Role of the Accountant
Governance model
Internal workings of the organization
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PERFORMANCE AND GOVERNANCE
HOLISTIC VIEWS
• Achieving company’s business objectives and
excellence in enterprise governance
 Current profitability
Sustainable future growth
 Internal controls
Stakeholder expectations
Corporate democracy
Protecting intellectual capital
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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PERFORMANCE DIMENSION (BASICS)
• Tools and Techniques for strategic enterprise
management
 Strategic planning
 business plans
 strategic implementation and monitoring
 strategic scorecard
 Assurance – Giving the Board the needed comfort
to assurance
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CONFORMANCE DIMENSION (BASICS)
• Compliance and Adherence – regulatory
requirements of corporate governance and best
practice requirements.
 The Roles of the Chairman and CEO
 The Board of Directors – Composition, nonexecutive directors, training etc
 Board Committees e.g. Audit, Remuneration and
nomination committees
 Risk management and Internal Audit
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CURRENT GOVERNANCE SCENE: WHERE
CONFORMANCE AND PERFORMANCE MEET
• The Regulatory framework
• Developing a strategy for good governance
• Building the board and measuring its
performance
• How to realise competitive advantage
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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THE ENTERPRISE GOVERNANCE STRUCTURE
SHAREHOLDERS
BOARD OF
DIRECTORS
REMUNERATION
COMMITTEE
GROUP MANAGEMENT COMMITTEE
EMPLOYEES
COUNCIL
NOMINATION
COMMITTEE
INTERNAL AUDITORS
AUDIT
COMMITTEE
EXTERNAL AUDITORS
MANAGEMENT
TEAM
Source: Omane-Antwi. B., 2011
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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WHY CORPORATE GOVERNANCE (CG)
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Because Nation’s competitiveness and wealth
depends on the competitive nature of its
corporations.
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Corporations play a critical role in the
National Economy.
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Liberalization and de-regulation of economies
resulting in greater freedom in management.
 Too many players in the field of business
resulting in competition with its attendant
weaknesses in standards and accountability.
 Market conditions are increasingly complex.
 Failure of corporates due to lack of
transparency and disclosures.
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CG Defined:
“ CG is the application of best management
practices, compliance of law in true spirit
and letter, adherence to ethical standards
for effective management, distribution of
wealth and discharge of social
responsibility for sustainable
development of all stakeholders”
(source: ICSA India)
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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• “CG is about promoting corporate
fairness, transparency and
accountability”
(James D. Wolfensohn, Former
President of the World Bank)
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CG Defined in Ghana
“The manner in which power is exercised in the
management of economic and social resources
for sustainable human development. It is a vital
ingredient in the maintenance of a dynamic
balance between the need for order and
equality in society, the efficient production and
delivery of goods and services, accountability in
the use of power, the protection of human
rights and freedoms
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and the maintenance of an organized
corporate framework which each citizen can
contribute fully towards finding innovative
solution to common problems. More
specifically corporate governance refers to the
manner in which the power of a corporation is
exercised in the stewardship of a corporation’s
total portfolio of assets and legal rights of all
stakeholders in the context of its mission”
(Source: Manual of Corporate Governance in
Ghana; December 6,2000)
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CG Definition Analysed
• CG is nothing but the moral or ethical or value
framework under which corporate decisions are
taken.
• CG encompasses
 Commitment to values and ethical business conduct
 Maximization of shareholders’ values on a sustainable basis
 Fairness to all stakeholders including – customers, employees,
investors, vendors, government and society at large.
 Risk management
 Environmental Policy
 Wealth creation for the Nation.
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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Corporate Governance(CG)
Perspective
• From a public policy perspective, CG
Is about nurturing enterprises
Ensuring accountability
Prescribing public policies
Providing corporate incentives
Disciplining corporates
Protecting the interest of stakeholders
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CG PHILOSOPHY – THE GUIDING FORCE
• Transparency
• Accountability
• Disclosure
• Value creation
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QUALITY CG DEPENDS ON:
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Management Integrity
Board’s Ability
Adequate Processes
Commitment from Top to bottom
Participation of Stakeholders in management
Quality of Corporate Reporting
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CG ISSUES AND MODELS
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Shareholders rights
Board Composition and Structure
Auditing, Control and Risk Management
Shareholder Model
 Wealth maximization
 Accountability
• Ethical leadership
 Ethical standards and accountability
 Protect the environment
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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THEREFORE, CG IS ABOUT:
Fulfilling long-term strategic goals of owners
Taking care of the interest of employees
A consideration for the environment and local
communities
Maintaining excellent relations with customers
and suppliers
Proper compliance with all the applicable legal
and regulatory requirements
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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Benefits of good CG
• Responsible for setting behaviour on the ethical
line
• Attacks directly corruption and cronyism
• Respected as a pillar of good governance
• In the political and administrative spheres, it
signifies growth of standards of
Transparency
Accountability
Profitability
Integrity
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• Essential tool for prosperity and economic growth.
• The link between good governance and business success
is irrefutable.
• Companies with weak governance system are significant
investment risks.
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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• A good corporate citizen becomes an icon and
enjoys a position of respect especially in the
transformational leadership areas: generation of employment
 contribution to public health
 disaster prevention and measures
 spread education
 sustainable consumption of natural resources
 saving of pollution
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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• Internationally accepted norms of good
CG standards found expression in:
 Private sector
 Public sector
 Governance thinking of countries i.e.
National Governance
Human Governance
Societal Governance
Economic Governance
Political Governance
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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THEREFORE,CG IS A FUNDAMENTAL PILLAR
Human Capital
Social Capital
Natural Capital
Physical Capital
Financial Capital
The “Asset Pentagon” (DfID, 2000)
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THE CRUSADERS OF CG – GLOBAL GOVERNANCE
• United Kingdom remains the leading crusader in
CG best Practices:
 Theft Act
Cadbury Committee
 Greenbury Committee
 Hampel Committee
 Turnbull Report
 Myners Review
 Directors Remuneration Report
 Tyson Report
 Higgs Report
 Smith Report
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
1968
1992
1995
1998
1999
2001
2002
2003
2003
2003
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THE CRUSADERS OF CG CONTINUE
 UK
Turnbull Review
 Revised Combined Code
2004
2003, 2008
 Operating and Financial Review (OFR)
2005
 Institute of Directors, UK
 Serious Fraud Office
1988
New Bribery Act
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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THE CRUSADERS OF CG CONTINUE
• USA
 Corrupt Practices Act
1977
 Treadmay Commission
1985
 Committee of Sponsoring Org.
1992
 Sarbanes Oxley Act
2002
 Foreign Corrupt Practices Act
1977
 National Association of Corporate Directors
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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THE CRUSADERS OF CG CONTINUE
• South Africa
 King’s Report I
1994
 King’s Report II
2003
 King’s Report III
2010
 Institute of Directors, S. Africa
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THE CRUSADERS OF CG CONTINUE:
The Commonwealth/The Organization for Economic
Co-operation and Development (OECD) Countries
Led by UK took the ff initiatives:
 OECD Principles
of CG
1994
 OECD Principles of CG
2004
 CACG Guidelines
1999
 OECD Anti-Bribery Convention
International Corporate Governance Network 1995
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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GLOBAL GOVERNANCE
CORE ISSUES
• Global governance initiative are taking place
• Legal and regulatory standards are increasing
• Company performance and compliance is being
measured
• Board independence and effectiveness is on the
spotlight
• Shareholders are encouraged to become more
engaged.
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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CG DEVELOPMENT IN GHANA
 Criminal Code (Causing Financial Loss Act 29) 1960
 The Companies Code 1963 (Act 179)
 The Securities Industry Law 1993 (PNDCL 333) as
amended in 2000 (Act 590)
 The Ghana Stock Exchange Listing Regulation 1990
 Economic and Organized Crime Office (Act 408) 2010
 Manual on CG in Ghana
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
2000
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THE 2003 ‘TRINITY ACTS’ OF GHANA
 The Procurement Act (Act 663)
2003
 Financial Administration Act (Act 654) 2003
 Internal Audit Agency Act (Act 658)
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
2003
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THE CORPORATE GOVERNANCE SYSTEM
Shareholders (the General Meeting of Shareholders)
Represent and Report to
Directors (the Supervisory Board)
Guide and Oversee
Report Transparently
Provide Capital
Elect and Dismiss
Report and Answer to
Managers (the Executive Bodies)
Source: IFC, March 2004
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The Corporate Governance Charter Model
Source: Kiel and Nicholson (2003)
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PERFORMANCE: THE BALANCE SCORECARD
Financial perspective
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Significant shareholders
Share price volatility
Relative performance
External published
accounts
• Public announcement
tracking
• Group financial status
Customer perspective
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Client profitability
Supplier cross-selling
Customer satisfaction
Territorial market share
Vision
&
Goals
Internal business
processes
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Quality review
Staff review
Sales activity
Cost monitoring
Incentive scheme
monitoring
Innovation and learning
• Research and development
initiatives
• IT performance review
• Staff development
• Internal strategy
N/B: The scorecard provides the cornerstone of a strategic management system
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PERFORMANCE: CORDINATING CHANGE ACTIVITIES
Strategic management
Long-term plans
shareholder return
Mission
statement
Balanced scorecard
Critical success
factors/purpose
Indicators
Customer service
Market
People
Effectiveness
Financial
Programme of
change activity
Management
information system
Control mechanism
measurement
Delivery of
change
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THE ACCOUNTABILITY CYCLE
Strategy
(with Board of Directors)
Feedback
External Reporting
& Review
Feedback
Objectives & Critical
Success Factors
Governance
Reporting
Accountability
Communities
Internal Reporting
& Review
Employees
Shareholders
Measurement
Financial Operational
& Social Measures
Customers
Feedback
Feedback
Management
Systems
Initiatives
Pay & Incentive
Targets & Budgets
Source: Epstien and Birchard (1999)
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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PERFORMANCE
CEO Role
Board Role
PROMOTING STRONG CORPORATE GOVERNANCE
(DIRECTORS AND EXECUTIVES IN ACTION)
 Long-term
strategy and
targets
 Acquisition and
divestitures
 Financial targets
and non-financial
drivers
 Stakeholder
communication
 Fiscal Policy
 Capital
expenditure
 Performance
review
 Fiscal Policy
 Forecasting and
budgeting
 Capital expenditure
 Decision
Support
 Performance
Advice
 Executive
Performance
and
Compensation
 Regulatory
requirements
 Succession
planning
 Stake Holder
Communication
 Workforce
acquisition,
retention and
performance
management
 Risk Management
 Performance
reporting and
review
 Initiative
Management
FEEDBACK
Board
Performance
Corporate
Performance
Source: Epstein and Roy 2002
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Board and committee structure
Productive meetings
Succession planning system
Financial reporting and communication/risk management
Strategic information system/information availability
Performance evaluation/compensation system
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Superior strategic guidance and oversight
Accountable information
High quality senior executives
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Long term financial success
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
PROCESSES
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OUTPUTS
Board Systems
& Structure
Independence
Diligence
Competence
Ethics
OUTCOMES
Board
Composition
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INPUTS
DETERMINANTS OF BOARD PERFORMANCE
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KEY PERFORMANCE INDICATORS (KPI)
Value
Creation
Value
Drivers
Attention to customers
Motivating employees
Managing product quality
Indicators
Customer satisfaction
Employee productivity
Defect rate
Strengthening team orientation
Return on Invested Capital
Learning from failure
1
Employee turnover
Optimizing inventory
Working capital/revenues
Shortening pro-dev cycle
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Time from patent to product
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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Performance Criteria for Superior
Corporate Governance & Value
Creation
The Right
FollowThrough
Mission of BoD:
To be a strategic asset
of the company,
measured by the
contribution we make
collectively and
individually to the
long-term success of
the enterprise
The right
Remuneration
The
Right
Process
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The Right
structures
The
Right
people
The
Right
culture
The Right
Issues
The Right
Info
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
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PERFORMANCE
BOARD’S OBJECTIVES
KEY PERFORMANCE MEASURES
FINANCIAL
• Long-term financial success
- EVA
- ROI
• Short-term financial success
- Share price
- Earnings
- Cash flow
• Long-term success of approved major
organizational changes
- Success of change (profit in excess of
plan)
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PERFORMANCE CONT’D
BOARD’S OBJECTIVES
KEY PERFORMANCE MEASURES
STAKEHOLDERS
• High level of ethical behaviour
and legal compliance
- # of ethical/legal violation
- Level of compliance with governance guidelines
• High level of corporate
governance and accountability
- # of voluntary disclosures
- Evaluation of quality external disclosures by
stakeholders or by experts
• Successful identification and
management of various
stakeholders’ needs
-# of meetings with stakeholders
- # of complaints (employees, community, customer)
- Existence of communication channels with board
- Stakeholders’ satisfaction survey
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PERFORMANCE CONT’D
BOARD’S OBJECTIVES
KEY PERFORMANCE MEASURES
INTERNAL PROCESSES
• Successful risk and crisis
identification and management
- # of risk audits performed & results
- # of crisis and evaluation of response
• Effective performance
evaluation systems (CEO, board,
directors, corporate)
- % of performance linked to non-financial performance
- # of board members owning shares
- Goals/objectives clearly defined for CEO, board etc.
- # of actions taken based on performance evaluation
• Effective review of corporate
strategic plans, structures and
major investments
-# of visits to company sites by individual director
- % accepted projects that met/exceeded expected ROI
- Evaluation of Info provided to board to assess projects
- # of hours spent on long-term strategic issues
• Effective functioning of the
board
- Overall attendance at meetings
- % of meetings without CEO
- % of meeting time spent on opposing view points
- # of days in advance that materials is sent
- Average duration of meetings
- Nomination of lead directors
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PERFORMANCE CONT’D
BOARD’S OBJECTIVES
KEY PERFORMANCE MEASURES
LEARNING AND GROWTH
• Strong succession for CEO and
senior management
- Existence of a position description for CEO
- Interim CEO identified
• Improving the composition of
board
- % of directors “financially literate”
- Diversity of board (race and gender %s)
- % of independent members
• Improving skills and knowledge
- Existence of training programmes
- Quality of programmes as evaluated by new
directors
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GOVERNANCE AS STRATEGY IN THE 21ST CENTURY
• Current research on attitudes to governance shows
lack of focus on strategic potential
• Governance requirements should be assessed for the
possibility of strategic fit
• The board needs to aim for a level of governance
that pre-empts the need to external interference
• Recent strategic developments in corporate
philanthropy provide a model for changing
perspective on governance
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CONFORMAMNCE 
COMMONWEALTH ASSOCIATION FOR CG-GUIDELINES
(1999)
Principle 1 – Leadership
“ The Board should exercise leadership, enterprise,
integrity and judgments in directing the
corporation so as to achieve continuing
prosperity for the corporation and to act in the
best interest of the business enterprise in a
manner based on transparency, accountability
and responsibility”
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Principle 2 - Board Appointment
“ The Board should ensure that through a
managed and effective process, Board
appointments are made that provide a
mix of proficient directors, each of
whom is able to add value and to bring
independent judgment to bare on the
decision-making process”
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Principle 3 - Strategy and Values
“ The board should determine the
corporation’s purpose and values,
determine the strategy to achieve its
purpose and implement its values in other
to ensure that it survives and thrives, and
ensure that procedures and practices are in
place that protect the corporation’s assets
and reputation”.
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Principle 4 - Company Performance
“ The
board should monitor and
evaluate the implementation of
strategies, policies, management
performance criteria and
business plan”
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Principle 5 – Compliance
“The
Board should ensure that the
corporation complies with all
relevant laws, regulations and
codes of best business practice”
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Principle 6 - Communication
“The Board should ensure that the
corporation communicates with
shareholders and other
stakeholders effectively”
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Principle 8 - Relationship with
stakeholders
“The Board should identify the
corporation’s internal and
external stakeholders and agree
to a policy, or policies,
determining how the corporation
should relate to them”
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Principle 9 - Balance of Powers
“The Board should ensure that no
one person or a block of persons
has unfettered power and there
is an appropriate balance of
power and authority on the
board”
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Principle 10 - Internal Procedures
“ The Board should regularly review
processes to ensure the effectiveness
of its internal systems of control, so
that its decision-making capability and
the accuracy of its reporting and
financial results are maintained at a
high level at all times”
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Principle 11 - Board Performance
Assessment
“ The Board should regularly
assess its performance and
effectiveness as a whole and
that of the individual directors ,
including the Chief Executive
Officer”
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Principle 12 - Management
Appointment and Development
“ The Board should appoint the Chief Executive
Officer and at least participate in the
appointment of senior management ,ensure the
motivation and protection of intellectual capital
intrinsic to the corporation, ensure that there is
adequate training in the corporation for
management and employees, and succession
plan for senior management”
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Principle 13 - Technology
“The Board should ensure that
technology and systems used in
the corporation are adequate to
properly run the business and for
it to remain a meaningful
competitor”
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Principle 14 - Risk Management
“The Board must identify key risk
areas and key performance
indicators of the business
enterprise and monitor these
factors”
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Principle 15 – Annual Review of future
Solvency
“The Board must ensure annually
that the corporation will
continue as a going concern for
its next fiscal year”
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DIRECTOR’S CHANGING ROLE
- Changing Responsibilities and best practice
in the 21st Century.
• Majority of directors should be independent
• Separate the roles of chairman of the board and CEO
• Enhancing the role of Non Executive Directors
• Set a “tone at the top” and a corporate culture that
promotes ethical conduct
• Periodic evaluation of performance of the board.
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AUDIT COMMITTEE’S CHANGING ROLE
- Changing responsibilities and best practice in the
21st Century
• Mandatory Audit Committees
• Independent members of audit committee
• Financial expertise with authority to engage
advisors
• Appoint, compensate, retain, and oversee
independent auditor
• Establish procedures for receipt, retention and
treatment of complaints relating to accounting,
auditing, and internal control matters.
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MANAGEMENT’S CHANGING ROLE
- Changing responsibilities and best practice in
the 21st Century
• To certify fair presentation of financial
statements and assessment of internal
controls and procedures over financial
reporting
• Prepare for new disclosure requirements
• Enhance code of ethics for senior officers
• Increase time and attention to governance
activities
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INTERNAL AUDITOR’S CHANGING ROLE
- Changing responsibilities and best practice in the
21st Century
• Mandatory internal audit function
• Independent Internal Auditor
• Oversight function of audit committee over Internal Audit
function
• Internal controls over financial reporting (COSO)
• Enterprise Risk Management (COSO)
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INDEPENDENT AUDITOR’S CHANGING ROLE
- Changing responsibilities and best practice in
the 21st Century
• Auditors are not immune from the economic pressures
• Regulatory framework for the auditing profession
• Non-audit services that create conflict of interest
prohibited.
• Fraud detection strong on the auditing agenda
• Rotation of lead partner or coordinating review partner
every five (5) years.
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CG MODELS OF BEST PRACTICES
•
•
•
•
•
•
•
•
•
•
•
Board to provide entrepreneurial leadership
Human Resource Accounting
Model code of organizational values
Transparency and Accountability Towards
shareholders and society
Financial Disclosures
Employee Welfare
Environmental Protection
Women’s Development
Model Audit Committee
Total shareholders’ return
Model policy on gifts and political contributions
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ABC OF EFFECTIVE CG BEST PRACTICE
MODEL
 Board of Directors – Monitor ethical
values, approve vision, mission, oversee
external communication, evaluate senior
management, monitor control system, risk
management and assess board
effectiveness.
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
 Executive Management – Develop and
demonstrate attitudes and beliefs,
develop business objectives, control
systems, risk management etc.
FRONT-LINE MANAGEMENT
PROCESS
PROCESS
PROCESS
PROCESS
3
OBJECTIVES
1
2
EFFICIENCY/
EFFECTIVENESS



FINANCIAL
REPORTING



COMPLIANCE/
RISK MGT



SUPPORT
FUNCTIONS
CFO, HR, LEGAL
TECHNICAL
INTERNAL
AUDIT
(Source: Omane-Antwi B; ABC OF EFFECTIVECG BEST PRACTICE MODEL,
2007)
 Front-Line Management – Align
business objectives and control activities.
 Support Functions – Rely on line control
objectives to support corporate control
objectives (provide coaching facilitation)
 Internal Audit – Monitor the entire
evaluation process, perform specific
reviews to support front-line executives,
think value for money and provide
information to the board of directors.
EXAMPLES OF CG Best Practice in
Ghana
AngloGold Ashanti Annual Report
 Identity of controlling interest holder
 Board structure and matrix of skills
 Responsibilities of Non-executive director
 Audit and CG Committee members
 Responsibilities of Audit and CG Committee
 Nomination Committee
 Remuneration Committee
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 Disclosure Policy
 Compliance Issues
 Codes of Ethics and Whistle-Blowing Policy
 Risk Management and Risk Factors
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CG TRANSGRESSIONS
• Executive compensation grossly disproportionate to
corporate results
• The misuse of corporate funds and assets
• Trading on insider information
• Disclosure problems – misrepresentation of true
earnings and financial conditions of companies
• Obstruction of justice or destroying of evidence
• Poor or complete lack of risk management
• Stock promotion that has gone to an extreme in the
creation of very questionable or unproven business
concepts.
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WHO ARE THE CG TRANSGRESSORS
•
•
•
•
•
•
•
•
•
CEOs and Senior Management
Investment Bankers
Market Markers
Investment Analysts
Regulators
Board of Directors
Internal Auditors
Public Accounting Firms
Government
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MEASURING PERFORMANCE
• Corporate and Board performance both need to
be measured
• Corporate measures should be :
 Specific to the organization and its competitive strategy
 Seen in the context of historic and sectoral information
 used to promote discussion and decide actions
• Boards need regularly to focus on specific
measures of their own governance performance
• IT can help store and manage the information
needed to assess both corporate and board
performance
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BOARD EVELUATION
ELEMENTS OF A BOARD EVELUATION SYSTEM
Key problems
Some possible alternatives
The agent of the evaluation
(Who evaluates the Board)
•
•
•
•
•
Self-evaluation (the board itself)
Board committees
Consultants
Researchers
Other external agents(authorities, rating agencies)
The content of the evaluation
(What should be evaluated)
•
•
Performance of board tasks
Board membership(e.g. Director education and
professional background, capabilities, presence and
preparation, independence and nominating system)
Board culture and processes (e.g. Cognitive
conflicts, trust and emotions, interactions and social
ties)
Board leadership and structure
•
•
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BOARD EVELUATION
ELEMENTS OF A BOARD EVELUATION SYSTEM
Key problems
The addressee of the
evaluation
(To whom the evaluation is
targeted)
The modalities of evaluation
(How to evaluate the board)
Some possible alternatives
•
•
•
•
•
•
The board itself
Internal board committees
Academic, researchers
External board committees
Owners, investors, etc
Regulators
•
Open discussion (e.g. In board meetings, or in special
meetings dedicated to board development)
Self-evaluation scheme
Standardised scheme/questionnaire
Reports to authorities, etc. (including annual reports)
Benchmarking
Interviews(e.g. With board members, the management,
shareholders and other stakeholders)
Participant observation by the evaluator in board
meetings
Document analysis
•
•
•
•
•
•
•
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BOARD EVALUATION CONTINUES
Three Approaches To Board Evaluation
What To Measure and How
The most robust assessments use a combination of these methods, rather than relying on a single approach .
Quantitative Survey
Qualitative :
Personal Interviews
Qualitative:
Group self-assessment
Description
Board complete a written survey,
rating board performance on a
numeric scale; results are discussed by
the full board in a feedback session.
Ono-on-one interview are
conducted with each board
member; results are discussed
by the full board in a feedback
session.
Trained facilitator leads a group
discussion of the full board;sessiom
summarized in a report for future
Strength
 Participants are familiar with this
straightforward ,standard practice
Can be completed at a participant's
convenience.
Can track a board’s progress
overtime
Feedback sessions often focus on
generating additional information and
insight to supplement the survey data
Anonymity can be ensured
Participants become engaged
in the interview process; most
find it interesting and even
enjoyable
Information tends to be more
detailed and complete than
what a survey gathers, which is
helpful in fully understanding
the issues, setting priorities,
and developing plans to address
them.
Feed back session tend to be
highly engaging
Anonymity can be ensured.
 Participants find the process
energizing and engaging
Critical thinking is heightened
because views are shared with
everyone and participants can
question each other
Generates consensus on
priorities and support for plans to
address them
Requires no preparation by
participants.
Serves as a team building
exercise
Most effective when there is a
high degree of trust and openness
among board members
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BOARD EVALUATION TEACHNIQUES
Establish objectives and scope of
evaluation
Quantitative technique
Qualitative techniques
Surveys
Interviews
Group
Observation
Face –to
face
Individual
Face-to-face
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Document
analysis
Telephone
Mail/
facsimile
Email/
Internet
Telephone
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BOARD EVALUATION INHERENT BENEFITS
Benefits
To organization
To board
To individual directors
Leadership
• sets the performance tone and
culture of the organization
• Role model for CEO and senior
management team
• An effective chairperson
utilising a board evaluation
demonstrates leadership to
the rest of the board
• Demonstrates long-term
focus
of the board
• Leadership behaviours
agreed and encouraged
• Demonstrates
commitment
to improvement at an
individual level
Role Clarity
• Enables clear distinction
between the roles of the CEO,
management and the board
• Enables appropriate
delegation principles
• Clarifies director and
committee roles
• Sets a board norm for roles
• Clarifies duties of
individual
directors
• Clarifies protection of
directors
• Clarifies expectations
Teamwork
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• Builds board/CEO/
management relationships
• Build trust between board
members
• Encourage active
participation
• Develops commitment and
sense of ownership
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
• Encourages individual
director involvement
• Develops commitment and
sense of ownership
• Clarifies expectations
85
BOARD EVALUATION INHERENT BENEFITS
Benefits
To organization
To board
To individual directors
Accountability
• Improved stakeholder
relationships, e.g. investors,
financial markets
• Improved corporate
governance standards
• Clarifies delegations
• Focuses board attention on
duties to stakeholders
• Ensures board is
appropriately monitoring
organization
• Ensures directors
understand their legal duties
and responsibilities
• Sets performance
expectations for individual
board members
Decision making
• Clarifying strategic focus and
corporate goals
• Improves organizational
decision making
• Clarifying strategic focus
• Aids in the identification of
skills gaps on the board
• Improves the board`s
decision-making ability
• Identifies areas where
director skills need
development
• Identifies areas where the
director`s skills can be utilized
Communication
• Improves stakeholder relationship
•Improves board-management
relationships
• Improved board-CEO
relationships
• Improves board- management
relationships
• Builds trust between board
members
• Builds personal relationships
between individual directors
Board operations
• Ensures an appropriate top-level
policy framework exists to guide
the organization
• More efficient meetings
• Better time management
• Saves directors` time
• Increases effectiveness of
individual contributors
Source: Kiel et al. (2005)
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MODULE 2
THE AGENDA – FINANCIAL AND IT
GOVERNANCE/RISK MANAGEMENT
• The Bottom line
• CG Mosaic and Financial Reporting Duty
• Enterprise-wide Risk Management
• Technology the Enabler
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FINANCIAL GOVERNANCE
THE BOTTOM LINE
• The link between good governance and
business is irrefutable
• Companies with weak governance systems are
significant investment risks
• Governance should be a key factor in
analysts’ recommendations
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DRIVERS OF SUSTAINABILITY
Sustainability actions
(Strategy, plans & programmes, structure and systems)
Sustainability performance
Corporate and
business unit
strategy
• Work force diversity
• Environmental impacts
• Bribery/corruption
• Community involvement
• Ethical sourcing
• Human rights
• Product safety
• Product usefulness
Stakeholders
reaction
• Employees
• Community
• Customer
• Government
• Investors
• Financial
analysts
Long term
corporate
financial
performance
Corporate Cost – Benefit of action
Source: Epstein and Roy (2001)
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Feedback
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CORPORATE GOVERNANCE MOSAIC AND FINANCIAL REPORTING QUALITY
Courts & Legal System
Financial Analyst
Legislators
Regulators
Stick Exchanges
Stockholders
Audit Committee
Internal Auditors
Board Directors
External Auditors
Management
Financial Reporting Quality
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Acceptable Balance Sheet
Increase in Assets
Growth
Profitability
Success
Liabilities of Defined Liabilities
Non satisfying stakeholders
Interest i.e. Communities,
stakeholders, employees, etc.
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PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
Challenges when striving for acceptable Balance Sheet
Challenges
What is needed
•Clashes with politicians and
associates
•Strong values/Principles
•Not being with the “crowd”
•Upholding utmost professionalism
•Strength to withstand temptations
•Integrity
•Possible loss of position
•Have God on your side
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•Non acceptance of mediocrity
PROF. K. B. OMANE-ANTWI; PhD; FBI (Hon)
IMPROVING FINANCIAL COMPLIANCE AND CONTROLS
Accounting Drivers
Environmental Drivers
•
•
•
•
•
Political/Social
Market
Location
IT
Sector
Inform
Influence/direct
•
•
•
•
Representation
Techniques
Regulation
Professionalization
Financial Activities
Strategy & Risk
Funding
Management and
Control
Organizational
Activities
Accounting
Compliance
Oganisational
Drivers
•
•
•
•
•
•
18/07/2015
Ownership
Size
Structure
People
Culture
Routines
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PROPERTIES OF FINANCIAL ACCOUNTING REPORTS TO
ENSURE QUALITY REPORTING
• Financial Statements
 Financial position ( Balance Sheet) Statement





Income Statement
Cash flow statement
Notes to the Accounts
Mandatory Disclosures
Corporate Governance Report
• Compliance with IAS/IFRS/Listing regulations
• Concept Statement
 Recognition VRS Disclosure







Relevance and Reliability
Substance over Form
Verifiability and Timeliness
Accrual VRS Cash basis
Conservatism
Going Concern
Clarity of difficult-and-easy-to verify information
• Timely Loss recognition
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“NO RISK, NO REWARD”
•
“Risk/Reward” is a long-standing
economic principle.
• The principles of Risk Assessment
suggests:
 Companies
which manage their risk
more effectively.
Should achieve higher rewards.
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RISK
• “The policy of being too cautious is the
greatest risk of all”
- Nehru
• “Take calculated risks.
That is quite different from being rash.”
- George S. Patton
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DOES RISK MEAN?
•
•
•
•
•
•
•
Opportunity?
Threat?
Uncertainty?
Upside?
Downside?
Some of the above?
All of the above?
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THE POSITIVE & THE NEGATIVE
•
Positive Risks -------- Opportunities
• Negative Risks -------- Risks
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Negative risks - threats
•
•
•
•
Lower profitability
Bankruptcy
Fraud, Theft
Inability to Respond
to Disaster:
 Natural: earthquake,
fire, flood.
Man-made: act of
terrorism
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• False financial
reporting
• Staff indiscipline
• Lawsuits
• Loss of Reputation:
 Unethical Behaviour
of management or
employees
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ENTERPRISE-WIDE RISK MANAGEMENT
A structured, consistent and continuous
process across the organization for
identifying, assessing, deciding on
responses and reporting on opportunities
and threats that affect the achievement of
its objectives
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ENTERPRISE RISK MANAGEMENT
Responding proactively to enterprise risk
management through:
 Risk identification
 Risk assessment/analysis
 Risk mitigation
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TAXANOMY OF BUSINESS RISKS
(ENTERPRISE-WIDE RISKS)
Internal Risk
External Risk
PEOPLE RISK
PROCESS RISK
SYSTEM RISK
FINANCIAL RISK
NON FINANCIAL
RISK
• Fraud
• Financial
• Data Security
• Credit risk
• Political risk
• Human error
process &
control
• Data integrity • Market risk
• Health & Safety
• Employment Law
• Customer
Relationship
Management
• Training &
empowerment
• Project
Management
• Supply Chain
Management
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• System
performance
• Competitor
risk
• Liquidity risk
• Capacity
planning
• Socioeconomic risks
• External fraud
• Change
Management
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ISO 3100 RISK PROCESS
Risk
Assessment
(5.4)
Risk Identification
(5.4.2)
Risk Analysis
(5.4.3)
Risk Evaluation
(5.4.4)
Risk Treatment
(5.5)
ISO 31000, Clause 5
Process for Managing Risk
Monitoring and Review
Communication and Consultation
Establishing
the context (5.3)
RISK MANAGEMENT FUNDAMENTALS
• Responsibility for risk management: An institution’s management
is responsible for its risk management processes
• Start with objectives: Objectives provide the starting point for risk
management by looking at events that might affect achieving the
objectives
• Identifying the risk events: Achieved via a number of ways.
Commonly through facilitated workshops and or blue-skies
thinking events
• Assessing Risks: By evaluating the identified risks in terms of the
expected impact if the risk materialises, combined with the
likelihood that it will occur.
• The Risk Appetite: The level of risk that is acceptable to the board
and management. Risks should always be managed to within the
risk appetite
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RISK MANAGEMENT FUNDAMENTAL CONT’D
• Risk Responses: These are the different ways to manage risks.
Usually referred to as THE FOUR “T”s.
(terminate, tolerate, transfer and treat)
• Management then attaches appropriate control actions to the
responses to being residual risks to within the risk appetite of
the organization.
• Risk registers or logs are then kept by the various units to
record their key risks and how those risks are being managed.
•
These are the pre-requisites for a meaningful risk based
internal auditing strategy.
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RISK MANAGEMENT SYNONYMOUS WITH
CORPORATE GOVERNANCE
• The sensible company takes risks – but not
gambles
• Risk identification process must be
comprehensive
• Each member of the organization must be
empowered to treat risk
• companies need robust systems for collecting
risk-related data – Technology is the enabler
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RISK MANAGEMENT THREE LINES OF DEFENCE
Risk Governance Framework
Risk Appetite
3 Lines of
Defence
Execution
Governance
& Management
Risk Strategy
First Line of
Defence:
departments
Value
Creation/Risk
Taking
18/07/2015
• Have primary
responsibility for dayto-day risk
management
• Bear the
consequences of loss
through economic risk
capital allocation
Second Line of Defence:
Risk and Compliance
Management Board Risk
Committee
• Assist in determining
risk capacity risk
appetite allocation,
strategies for
managing risk
• Provide oversight,
support, monitoring
and reporting
Third Line of
Defence: Audit
and Board
• Board sets risk
appetite and provides
oversight.
• Audit provides
independent and
objective assurance
on the overall
effectiveness of the
risk governance frame
work (design and
Implementation)
Alignment Between Risk Capacity, Risk Appetite and Risk Budget
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IT GOVERNANCE BASICS
IT Governance
Identity Management
Governance
Identity and Access
Management
Identity Management
IT Systems, Applications, Database,
Infrastructure
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Executive/Committee Level
• Programme and project objectives and requirements
• key performance indicators
• Policy management, distribution
• responsibilities and resource assignment
• Business justification and approval
• Funding
• Risk management
• Change management
• Regulatory compliance, audit
Technical-Business/Working group Level
• Business requirement for access
• Access life cycle, review cycles
• Mapping applications and scope
• Configuration of access review
• Quality assurance (QA) and testing, ensuring access certification goals
are meet
• Issue analysis, findings and root-cause analysis, recommendations
• Identification of noncompliant entitlements
• Change management
• Trend identification and reporting
Technical and Vendor/Project level
• Project sourcing, planning, staffing, funding, SLA, contracting
• Technology assessment, integration
• Technology deployment, configuration
• identities and credentials, access privileges
• QA and testing, assurance that the access privilege set is operational
• Certification, accreditation, audit, documentation
• Ongoing technology support
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PRIMARY IT GOVERNANCE FUNCTIONS
Strategic planning and Alignment
• IT steering committee/priority process
- Alignment with business objectives
• IT strategy and architectural standards
•
IT project tracking
• Support for strategic enterprise initiatives
IT Operations
• Applications development
- Project management
- System development cycle
• Production support
- Production control and operation
- job scheduling
- System backups
• Technical architecture
• Network design, management and operation
• Help desk
• Information security management
• Business continuity and disaster recovery
• Contract administration and vendor
management
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Financials
• IT Operating budget
• IT capital budget
• IT asset management
• IT contract management
• IT resource allocation and planning
Control Framework
• Information management
- Corporate – Privacy, business process
owners, records retention
- IT department – SDLC, Security
• Standards – CoBIT, ITIL, ISO, SAS 70
• Practices and procedures
• System documentation management
• Quality assurance
• Regulatory compliance
- Escalation procedures
- Disclosure procedures
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LEVEL 3
THE AGENDA – The Green CEO – Enterprise and
Governance
• STAKEHOLDERS’ ACTIVISM
• Antecedents and Consequences of superior
Environmental Performance
• Green Management Challenges
• Corporate Governance and the Environment:
What Type of Governance Creates Green
Companies
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110
STAKEHOLDERS ACTIVISM
“In recent years, firms in polluting industries have seen a
significant increase in stakeholder demands for better
environmental performance”
(Bansal, 2005, Sharma and Henriques, 2005)
“In addition to an emerging consumer preference for
‘green’ products, these include environmental
activism from various external stakeholders such as
environmental non-governmental organizations
(ENGOs) or the media”
(Kassimis and Vafeas, 2006)
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STAKEHOLDERS OF THE FIRM
•
•
•
•
•
•
•
Media
Customers
Suppliers
Government
Local communities
ENGOs
Shareholders
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“Recent Empirical evidence suggests
that superior environmental
performance can under some
conditions lead to superior financial
performance in polluting industries”
(King and Lenox, 2002)
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ANTICEDENTS AND CONSEQUENCES OF SUPERIOR ENVIRONMENTAL
PERFORMANCE
Measurement
Commitment
Strategic
Planning
Productivity
Environmental
Performance
Return on
Investment
Earnings Growth
Disclosure
Life Cycle
Analysis
Performance
Measurement
Supplier
Focus
Employee
Involvement
Resource
Commitment
Capital
Equipment
Decision
Making
Source: Adapted from Wisner, Epstein, and Bagozzi (2003 a, b)
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GREEN MANAGEMENT CHALLENGES
• Proper green management requires a substantial
amount of extra management effort
• Managers may prefer an alternative uses of the
resources utilized in improving firm environmental
performance
• Managers have a preference towards maximizing firm
growth rates because large firm size is linked to
remuneration, power, job security and status.
• Managers will, ceteris paribus, try to reduce the amount
of resources that are channelled towards pursuits other
than maximizing growth
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ACTION GREEN CEO/BOARD OF DIRECTORS
• Challenging the moral hazard problem since the
unobserved actions by managers go against the
interest of stakeholders
• Institutions of ‘environmental performance
based compensation’
• Using corporate governance control mechanism
 Incentive contracts
 Monitoring
 Take interest in government regulations
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Corporate governance and the Environment:
What Type of Governance creates Green
Companies
Determinants of firms’ environmental
performance levels are inherent in CG
mechanisms:
 Board of Directors
 Managerial incentives
 Market for corporate control
 Legal and regulatory system
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EXPANDING DETERMINANTS OF ENVIRONMENT
GOVERNANCE MECHANISM
• Market for Corporate control
 If an organization exhibits inferior environmental performance
levels, stakeholders are likely to punish such an organization,
thereby affecting its stock price (Barnett and King, 2008)
 Investment fund managers indicated that they primarily used
media reports in assessing firm’s environmental legitimacy
(Bansal and Clelland, 2004)
 In sum, a greater exposure to the market for corporate control
implies a greater exposure to stakeholders’ activism
N/B The greater the exposure to the market for corporate
control, the greater is a firm’s level of environmental
performance
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• Legal and Regulatory System
 New pieces of environmental legislation have
increased considerably the negative consequences
of environmental under performance, which not
only have a direct detrimental effect on
organizations but also imply personal
responsibilities for its managers – e.g. SarbanesOxley Act in USA.
N/B The greater the exposure to the legal and
regulatory system, the greater is a firm’s level of
environmental performance
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• Board of Directors
 Boards have the legitimacy and power to monitor and exert
pressure over managers so that their actions are mainly
targeted at satisfying shareholders’ interest
 Directors to exhibit interest in introducing environmental
components in executive compensation policies (Berrone and
Gomez-Mejia, 2009)
 There should be a balance in representation and interest
regarding outsiders (Directors) who independent of
management and able to act on the shareholders’ behalf and
insiders (Directors) who are beholden to the CEO for their
jobs.
N/B The greater the representation of shareholders on the
corporate board, the greater is a firm’s level of environmental
performance.
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• Equity Based Managerial Incentives
 Equity based incentives such as stock options tie managerial
interest with those of shareholders in terms of working
towards a long-term increase of share value
 Effects of equity based incentives will help improve
managers’ propensity to engage in environmental initiatives
 Improvement in environmental performance might provide
financial returns, but require intense managerial effort and
commitment.
N/B The greater the equity-based managerial incentives, the
greater is a firm’s level of environmental performance.
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METHODS AND DATA COLLECTION – EPA GHANA EXAMPLE: THE “AKOBEN” PROGRAMME
THE 7 CONSITUENTS OF THE AKOBEN
No Topic
The topic if:
1

Legal Requirements
Hazardous and Toxic Waste-Onsite 
Management, Spills and Accidents
3A Compliance with Environmental 
Quality standard-toxics
2
3B Compliance with Environmental
Quality standard-Non-toxics & noise
pollution
4 Environmental
Monitoring
and
Reporting
5 Best
Practices-Environmental
Management
6 Compliance
Management
and
Community Relations
7 Corporate Social Responsibility (CSR)
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




A company complies with all mandatory legal
requirement
A company has complied
A company has complied with the environmental
quality standards for toxics related to effluents and
other discharges that affect the environment.
A company has complied with the environmental
quality standards for conventional pollutants and
parameters like noise and vibrations.
The level of effort the company applies for monitoring
and testing the sample meets the legal requirement
A company has adopted adequate national and
international best practices
A company’s commitment to be responsive to public
complaints
A company has strong commitment regarding social
responsibility.
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EXPLANATIONS OF RATINGS
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GREENING GHANA
“It becomes clear that adaptation and
mitigation measures for economic
growth, social equity, global warming and
climate change for Africa, encompasses a
broad-based sustainable approach”
Eric Francis Noir
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GLOBAL ENVIRONMENTAL FACILITY (GEF-5)
ALLOCATIONS
FOCAL AREA
STAR GEF-5 INDICATIVE
ALLOCATION
ALLOCATIONS REMAINING
TO BE PROGRAMMED
Biodiversity
2620000
2620000
Climate Change
2450000
2450000
Land Degradation
3780000
3780000
TOTAL
8850000
8850000
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GLOBAL ENVIRONMENTAL FACILITY
• The Global Environment Facility (GEF) unites 182
member governments — in partnership with
international institutions, nongovernmental
organizations, and the private sector — to address
global environmental issues.
• GEF provides grants to developing countries and
countries with economies in transition for projects
related to biodiversity, climate change, international
waters, land degradation, the ozone layer, and
persistent organic pollutants
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EXAMPLES OF GEF PROJECTS IN GHANA
GEF
GEF COMPLETION
ID # Agency DATE
49
Project Title
Focal Area
IBRD 1999
Coastal Wetlands Management
Biodiversity
136 IBRD 2007
Natural Resource Management
Biodiversity
Preparation of Initial National Communication for the
Implementation of the UNFCCCC
Renewable Energy-Based Electricity for Rural, Social and Economic
Development in Ghana
Climate
Change
Climate
Change
Biodiversity Conservation of Lake Bosumtwe Basin
Biodiversity
320 UNDP 1997
333 UNDP 1998
817 UNDP 2005
UNID
2007
1466
O
1788 UNDP 2003
2596 IBRD 2012
2402 UNDP 2010
Enabling Activities to Facilitate Early Action on the Implementation
of the Stockholm Convention on Persistent Organic Pollutants
POPs
(POPs) in Ghana
National Capacity Self-Assessment for Global Environmental
Multi Focal
Management (NCSA)
Area
Climate
Ghana Urban Transport
Change
Sustainable Land Management for Mitigating Land Degradation, Land
Enhancing Agricultural Biodiversity and Reducing Poverty (SLaM) Degradation
LEVEL 3
THE AGENDA – ESSENTIAL BOARDROOM
LEADERSHIP SKILLS
•
•
•
•
•
•
•
Building a Better Board
OECD Principles of Corporate Governance
Soft Skills Model
Board Empowerment
THE MAXIMS
DESIGNING THE FUTURE
CONCLUDING THOUGHTS
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BUILDING A BETTER BOARD
• Due care should be given to Board selection and
succession
• Board members’ skills, expertise and experience
should complement one another
• The performance of individual directors needs
regular monitoring and ongoing development
• Once the structure is right, the board must work
through a series of further developmental stages.
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BOARDROOM LEADERSHIP SKILLS
Seven competencies for strengthening resilience at the board level
(Source: People Management, October 2011)
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OECD PRINCIPLES OF CORPORATE GOVERNANCE
TOPIC
PRINCIPLE
COMMENTS
I. The rights of
shareholders
The corporate governance framework
should protect shareholders’ rights.
General conceptual framework for
establishing shareholders’ property rights.
Recognizes the inevitable separation of
ownership and control in widely held firms
but does not propose specific approaches to
solving the agency problem. Does not argue
for one share-one vote rules but advocates
transparent takeover.
II. The equitable
treatment of
shareholders
The corporate governance framework
should ensure the equitable treatment of
all shareholders including minority and
foreign shareholders. All shareholders
should have the opportunity to obtain
effective redress for violation of their
rights.
Stresses the importance of protecting the
rights of minority and foreign shareholders.
Does not take a position on the desirability
of one share-one vote rules. Major thrust is
on better disclosure and information flows
to shareholders
III. The role of
stakeholders in
corporate
governance
The corporate governance framework
should recognize the rights of stakeholders
as established by law and encourage
active co-operation between corporations
and stakeholders in creating wealth, jobs,
and the sustainability of financially sound
enterprises
Covers employees, suppliers, creditors, and
all other non-shareholder individual and
groups with an interest in some aspect of
the performance of a corporation’s
obligations. No inevitable conflict is
recognized between shareholders and other
stakeholders.
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OECD PRINCIPLES OF CORPORATE GOVERNANCE CONT’D
TOPIC
PRINCIPLE
COMMENTS
IV. Disclosure and
transparency
The corporate governance framework
should ensure that timely and accurate
disclosure is made on all material
matters regarding the corporation,
including the financial situation,
performance, ownership, and
governance of the company.
Endorses the maximum
predictable flow of information
to shareholders. Implies that
shareholders’ property rights
(ought to) extend to insiders’
material information about the
firm.
V. The
responsibilities of
the board
The corporate governance framework
should ensure the strategic guidance of
the company, the effective monitoring of
management by the board, and the
board’s accountability to the company
and the shareholders.
Argues that independence from
management is necessary for a
board to carry out its
responsibilities effectively. In
addition to serving as
shareholders’ representatives,
the board’s responsibilities
include relations with
stakeholders and the public at
large.
Source: OECD (1999a)
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BOARDROOM LEADERSHIP SKILLS – SOFT SKILLS MODEL
Soft
Skills
Human
Capital
Talent
Mgmt
System
Mgmt
Team
N/B Soft skills are critical to all facets of the venture. They can provide great energy and cohesion for the members of
the enterprise. Your success is more secure with an experienced management team at the top.
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Soft skills
What the Leaders do
What Other get
Humility and Selfconfidence
The ability to allow others to
contribute to the vision while
maintaining the confidence that the
vision is well-founded
The ability to contribute to
the vision in order to
generate a sense of
ownership
Emotional
Intelligence (EQ)
Sensitivity to the emotional aspect of
life and how personal attitudes and
expressions influence company
success & personal satisfaction
A personal sense of “feeling
good” at work (and at
home) that can assist in
managing the stress of
being an entrepreneur.
Build on Strength
& minding your
Core
Incompetence
Focus on using personal strength
enhances the ability to see them in
others. This can reinforce the
delegation of tasks to those who can
do them better
Working in area of strength
builds self-efficacy, selfesteem, job satisfaction and
loyalty. Who wants to leave
such rewards?
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Soft skills
What the Leaders do
What Other get
Integrity in Speech
and Action
Awareness of the knowing-doing
gap enhances the opportunity for
integrity. The goal becomes doing
what should be done when it
should be done.
Trust and security grow in an
environment where integrity
is the goal. Surprises in this
context are pleasant and
excitedly anticipated
Sensitivity to Context
Awareness of what should be said
, to whom, and when matters of
strategy and responsibility – not
emotion
Hearing/knowing
information intended to be
confidential can lead to
insecurity, mistrust,
decrease in morale, and
leaks to competitors
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Soft skills
What the Leaders do
What Other get
Managing
Perceptions
Understanding that perception is
reality by virtue of its ability to
create reality. What you say and do
is critical
The perception of success
extends beyond personal
contribution to the product or
service. The image of success is
created by all members of the
enterprise, not just the
leadership.
Appreciation for
others’ roles
Recognition that the functions of
others is critical to success and that
the pride of success is magnified by
the organized cooperation of many.
Recognition of good
performance enhances the
perception of self-efficacy as
well as pride
Teamwork is Key
Recognizing that other are not
merely extensions or duplications
of your mind and body parts. The
enterprise is the composite of
many hearts, hands, and minds.
The distribution of profits reflects
your understanding of this principle
Personal satisfaction from
individual and unique
contribution to the outcome.
Satisfaction and pride resulting
from the share of the profits
reflecting your true
contribution
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THE TEN (10) THINGS EVERY BOARD OF DIRECTORS MUST GET RIGHT
1. Establish who the board represents, and how to balance
their interests.
2. Set some form of board leadership independent of
management
3. Decide on and fulfil a positive role in corporate strategy
4. Build and maintain an effective board infrastructure
5. Establish and enforce personal rules on director self-dealing
and independence
6. Build strong channels for inside and outside board
information flows
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THE TEN (10) THINGS EVERY BOARD OF DIRECTORS MUST GET RIGHT CONT’D
7. Hire and fire management and ensure succession plans
8. Pay management for creating investor value
9. Assure effective interval controls – This is an ongoing
evolving board process – global standards are changing
10. Verify accurate, timely, complete disclosures to investors and
regulators
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THE PROGRESS OF BORAD EMPOWERMENT – 21ST CENTURY EXAMPLES
COMPANY
INNOVATION
Doyton Hudson
Corporation
Required the outside directors to conduct an annual
evaluation of the CEO
Medtronics
Solicits opinions on board procedures by requiring all
director to complete a questionnaire, then the full board
reviews the result at an annual meeting and tries to make
improvements
Stanhome
Developed a formal document that specifies the board’s
purposes, size, proportion of outside directors, annual
calendar, and expectations of directors and management
Mallinckrodt
Separated the roles of chair and CEO
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THE PROGRESS OF BORAD EMPOWERMENT – 21ST CENTURY EXAMPLES CONT’D
COMPANY
INNOVATION
Lukens
Formed a committee of outside directors to study a major
acquisition proposal, hold discussions with management, and
recommend action to the full board.
Campbell Soup
Company
Designated a lead director with the title of vice chairman
Monsanto
Increased the proportion of the board’s time that would be
focused on strategic direction and considered specific capital
proposals with that framework.
General Motors
Developed an explicit sets of guidelines that outline how the
board will function and be structured.
N/B The companies are listed in the chronological order in which they made significant moves towards empowerment. The innovation
listed is only one of several changes each board has made. Members of the American Society of Corporate Secretaries provided some of
these examples
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BOARDROOM LEADERSHIP SKILLS
THE MAXIMS
1. Governance matters
2. Evaluate your interest in, and commitment to, the organization
before severing or continuing to serve
3. Don’t be a “letterhead” director
4. Become a professional director
5. Know what’s expected of you
6. Get to know your colleagues
7. If your are newly appointed director, hook up with a mentor
8. Immediately begin to acquiring an understanding of governance
and the nature of board work.
9. Understand board topography
10. Serve your apprenticeship, but do so quickly.
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THE MAXIMS CONT’D
11. Realize governing is a distinctive organizational practice
12. Recognize the difference between governing and managing, then
respect it.
13. Keep your eyes on the prize
14. Don’t represent narrow interest or constituencies
15. Understand your legal fiduciary duties of loyalty, care and obedience
in addition to director liabilities/protections
16. Understand your board’s governing responsibilities
17. Acquire an increasingly sophisticated understanding of content areas
underpinning issues your will be addressing.
18. Develop (or enhance) your healthcare organization-specific financial
literacy.
19. If you’re the board chair, learn how to run effective and efficient
meetings
20. Do your home work.
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THE MAXIMS CONT’D
21. Show up
22. Participate
23. Question
24. Play devil’s advocate
25. Acknowledge conflicts-of-interest and disengage when you
have one
26. Keep sensitive information confidential
27. Be ethical
28. Do governing work only in the boardroom
29. Stroke
30. Don’t make individual requests of the CEO and executive
team members
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THE MAXIMS CONT’D
31. Be prepared to vote no.
32. Argue in the boardroom, lock arms when you leave it.
33. Don’t engage in personal financial dealings with other directors
or executives
34. Never do non-governance work for the organization
35. Keep your personal relationship with the CEO at arms-length.
36. Provide the CEO with advice and council, but be careful.
37. Be prepared to lead.
38. Be a good board and organizational citizen
39. Prior to the conclusion of each term, assess your performance
and contributions.
40. Enjoy the journey and have fun.
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DESIGNING THE FUTURE
THE EMERGING MODEL
• The key to the board’s role lies in tracking relationships,
not following procedures
• Boardroom sycophancy must end, new directors must
feel able to say that the emperor has no clothes
• Leaders must not be remote to the public and
employees, they should get out and find out what is
really going on.
• There should be less cult of the CEO and the reward for
failure should be to stick around, helping others learn
from the past
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THE PRICE OF FAILURE
• It takes decades to build a good reputation but only
months to lose it
• Good governance anticipates problems and
preserves public trust
• Non-executives are increasingly held accountable for
company failures
• Investors will continue to exert pressure for reform
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Concluding Thoughts
“Good CG is essentially built on the foundation of
inspiration that breeds Confidence, Competence,
Vision and Virtue.
It also relates to one’s professional conduct and
relationship with stakeholders like shareholders,
employees and the government”.
(Institute of Directors, Ghana Code of Ethics)
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THE PLAIN TRUTH ABOUT CG
• It is not only to protect shareholders’ wealth but it
should be tempered by the influences and
objectives of other parties:
Management Team/Directors
Employees and Trade Union
The Public at large
Customers
Supplies
Finance Providers
Professional Accountants/Assurance Service Providers
Lawyers and
Government
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CG PILLARS YOU SHOULD NOT FORGET
•
•
•
•
INTEGRITY
ACCOUNTABILITY
INNOVATION
PARTNERSHIP
N/B “THE ROAD TO REFORM IS MORE TRUST,
FEWER TARGETS AND NOT TOO MUCH
NUMBER CRUNCHING” –
(21st Century Enlightment Publication; RSA UK JOURNAL,
SPRING 2011)
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EPILOGUE
- CG means ‘Change’ Truly there should be a change . In
short ‘Change’ is enviable-Change is the enviable
outcome of progress and innovation.
- Innovation is simply the learning perspective ,which
continues to improve and create future value.
- Again, CG is about change, innovation, learning new
things to improve and create future value for the
organization.
-Truly, CG is a catalyst for organization success.
Let us all embrace good CG practice today
(Prof. Kwame Boasiako Omane-Antwi ,2011)
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THE END
THANK YOU
Kwame Boasiako Omane-Antwi PhD, MBA, MA, AMP(OXO),FCCA,
FRSA(UK), FBI(Hon), FIOD(UK), FIOD(GH), FCIM, MCIPD, MIMIS
Professor of Accounting & Vice Rector
Pentecost University College
Sowutuom
Tel 0244-32448/0202011775
E’mail: [email protected]
[email protected]
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