Archive for August, 2011

Steve Jobs’ Resignation Highlights the Importance of Succession Plans

by Catherine Dunn for Corporate Counsel, August 26th, 2011.

Between Apple CEO Steve Jobs stepping down from his iThrone and news of former Vice President Dick Cheney’s top-secret resignation letter, companies big and small might want to heed these timely reminders and ask: Do we have a succession plan in place?

Not least because, according to some major studies in recent years, many companies have no such plan.

Identifying the next round of leadership is a matter of good governance and risk management, says David Larcker, a professor at the Graduate School of Business at Stanford University.

“One of the key tasks of the board [of directors] is to ensure they have the right people in place,” Larcker explains. Even if boards are reticent about sharing the proprietary information involved in a succession—as has been mentioned in the closely held plan to hand off Apple’s top spot from Jobs to his COO, Tim Cook—they “have to convey to shareholders that they’re on top of this.”

On the risk-management side, says Larcker, the question is, “What is it I can do to mitigate undesirable things happening to the organization?” He adds, “These are tough decisions.” Planning for an emergency, an accident, or a potential executive ouster are not the most comfortable subjects for anyone.

But done well, a succession plan can gird a company when misfortune strikes. McDonald’s is credited with having a plan that served them well when two of their CEOs died in the course of a single year. And yet, the company proceeded “without a hitch” says Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. (continue reading… )

Culture and Corporate Governance Principles in India: Reconcilable Clashes?

published by The Global Corporate Governance Forum, August, 2011.

Private Sector Opinion #23, by Pratip Kar. The structures, institutions, and legal framework of corporate governance are developed and administered by individuals whose behaviors are shaped by cultural and personal concepts of hope, ambition, greed, fear, uncertainty, and hubris, as well as by the social ethos. A problem arises when these influences do not conform with the regulatory prescriptions of corporate governance. This Private Sector Opinion explores the dynamics of culture and corporate governance in India by calling attention to three areas where the clashes are strongest: related-party transactions, the promoter’s or large shareholder’s actions, and the board’s nominations, deliberations, and effectiveness. Foreword by Naheeda Rashid and Paul Lee of Hermes Equity Ownership Services Ltd.

Download PDF here

IFC and TSEG to Develop Corporate Governance, Information Technology in Emerging Markets

published by The Global Corporate Governance Forum, August 22nd, 2011.

Tokyo, Japan, August 22, 2011—IFC, a member of the World Bank Group, and the Tokyo Stock Exchange Group Inc. (TSE Group) have signed a Memorandum of Understanding to cooperate in developing capital markets in emerging economies, helping protect investors through better corporate governance, ensure fair markets, and spur economic growth. The MOU was signed by Hideaki Suzuki, Director of the IFC Tokyo Office, and Koichiro Miyahara, Senior Executive Officer of TSE Group.

IFC and TSE Group aim to improve the operation and regulatory framework of these markets by sharing knowledge and expertise in developing information technology infrastructure and implementing corporate governance codes for listed companies.

Strong corporate governance standards and market infrastructure contribute to raising companies’ performance and investors’ confidence, helping to bring much-needed capital for growth,” said Rachel Kyte, IFC Vice President for Business Advisory Services. “IFC has more than a decade of experience implementing corporate governance projects. We welcome this new partnership with the TSE Group to harness our combined expertise in building capacity and developing infrastructure for emerging capital markets.”

IFC will collaborate with the TSE Group through its Global Corporate Governance Forum, a multi-donor trust fund. The Forum partners with international, regional, and local institutions to promote the private sector as an engine of growth, reduce the vulnerability of emerging markets to financial crises, and provide incentives for corporations to perform in an efficient, transparent, sustainable, and socially responsible manner.

“As one of the leading stock exchanges in the world, the TSE Group’s expertise in market operation and information technology in trading systems will be extremely useful to developing countries. I believe our efforts to enhance the quality of these emerging capital markets and improve the corporate governance of listed companies will also be highly appreciated by market participants,” said Koichiro Miyahara.

TSE Group is the holding company of Tokyo Stock Exchange, Inc. (TSE), best known for its equities market, valued at $3.81 trillion as of the end of July 2011. It also boasts the largest market for Japanese securities derivatives such as Japanese Government Bonds and TOPIX (Tokyo Stock Price Index) futures. For more information, visit www.tse.or.jp/english

IFC and TSEG to Develop Corporate Governance, Information Technology in Emerging Markets

Tokyo, Japan, August 22, 2011—IFC, a member of the World Bank Group, and the Tokyo Stock Exchange Group Inc. (TSE Group) have signed a Memorandum of Understanding to cooperate in developing capital markets in emerging economies, helping protect investors through better corporate governance, ensure fair markets, and spur economic growth. The MOU was signed by Hideaki Suzuki, Director of the IFC Tokyo Office, and Koichiro Miyahara, Senior Executive Officer of TSE Group.

IFC and TSE Group aim to improve the operation and regulatory framework of these markets by sharing knowledge and expertise in developing information technology infrastructure and implementing corporate governance codes for listed companies.

“Strong corporate governance standards and market infrastructure contribute to raising companies’ performance and investors’ confidence, helping to bring much-needed capital for growth,” said Rachel Kyte, IFC Vice President for Business Advisory Services. “IFC has more than a decade of experience implementing corporate governance projects. We welcome this new partnership with the TSE Group to harness our combined expertise in building capacity and developing infrastructure for emerging capital markets.”

How Can Internal Audit Report Effectively to Its Stakeholders?

by Andrew Cox for Qfinance, August 15th, 2011.

Executive Summary

  • Internal audit has a range of stakeholders who rely on its work, seeking assurance that the organization is running well and that there are effective controls in place.
  • Internal audit has a responsibility to its stakeholders to provide reports on the operation of the organization’s risk management, control, and governance processes. It also has a responsibility to justify the value of its work and the organization’s spending on internal audit resources.
  • Internal audit can report on its work to its stakeholders by:
    • reporting on the outcomes of its internal audit work;
    • reporting on the quality of its internal audit work.
  • Together, these elements combine to provide stakeholders with an overall view of the effectiveness of internal audit; one without the other will only provide a partial reporting structure.

Introduction

Internal audit has a variety of stakeholders who rely on its work. These include: the board of directors; the audit committee; the chief executive officer; senior executives such as the chief financial officer, chief information officer, chief risk officer, etc.; the external auditors; in some cases, regulatory bodies; and stockholders—who, in the case of government organizations, could be the public.

All these stakeholders are seeking assurance that the organization is running well, and that effective controls are in place and operating properly. Internal audit has an important role to play in providing assurance to these stakeholders, but the trick is how to report the results of its work to them effectively. (continue reading… )

Megatrends for the decade ahead

published by Service 2020, July 25th, 2011.

Megatrends for the decade ahead is a BDO report written by the Economist Intelligence Unit. It draws upon two primary inputs:

• A wide-ranging survey of 479 business leaders in Europe, the Middle East, Africa and Asia Pacific, spanning all industries and all revenue brackets. All respondents were in management functions, while over half hailed from the C-suite or board level.

• Interviews with eight experts and executives representing various industries.

The writer of the report was James Watson and the editor was Monica Woodley.

Key Findings

Lessons from service leaders

If customer service is going to be increasingly important in the decade ahead, what are the leading practitioners already doing differently today? In our survey, about 16% of executives describe their firms as “excellent” at customer service, relative to their peers. Segmenting these firms against those that rate themselves as merely average, or below average, yields some insights into how some leading customer service practitioners are working:

• While the average firms of today compete primarily on quality, service leaders unsurprisingly already prioritise customer service as their competitive differentiator, far ahead of cost. In line with this, these firms are far more systematic about implementing proper systems for tracking customer feedback and complaints, as well as identifying potential service weaknesses. Nearly 50% more have these in place, ahead of weaker rivals.

• Three quarters of customer service leaders have empowered their staff to make decisions when resolving customer issues, compared with less than half among average firms. And while weaker firms are investing more heavily in standardised service processes, leading firms are prioritising staff training and development, and also working harder to define service standards and goals.

• While both strong and weak service firms see information-enabled consumers as a major driver for change in recent years, weaker firms think communications technology is the primary driver, while leaders see competition as the defining force.
• Service leaders are more focussed on social media already: they monitor it more closely, use it more often to connect with clients and generally collect more external data to feed into their tracking systems. Related to this, a far higher proportion of leaders say their firms are excellent, or above average, at using technology to understand their customers.

• Finally, while service leaders expect to use service to stand out from the crowd, it is largely only the weaker firms that expect typically to charge a premium for this service.
Download the full document here.

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(in Portuguese) A weekly chronicle about shareholders' rights & duties, activism and capital markets regulation, by Renato Chaves.
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