How is your company’s corporate governance?

by Paul Strebel for Gulf News, November 22nd, 2010.

Here’s a question to consider β€” what do you get when you put a room full of CEOs from different industries together in a corporate board room and ask them to govern a company?

Almost exactly two years ago, the “perfect storm” of a decade of excess credit, excessive leverage, and uncontrolled expansion by financial institutions precipitated the financial crisis. A common thread was that the boards of these financial firms were oblivious to the risk build-up.

The behaviour of boards of directors must change to prevent future crises. This is a global problem with application for boards everywhere from the Middle East, to North America and in between.

Here’s a question to consider β€” what do you get when you put a room full of CEOs from different industries together in a corporate board room and ask them to govern a company? Several answers could apply, but what accompanied the financial crisis was a breakdown in risk management at the top.

Boards of supervising directors have two primary functions: supporting the creation of long-term economic value, while at the same time controlling the conduct of business in the interest of shareholders and other stakeholders. These two functions are inherently at odds. Looking at the composition of most boards, it should come as no surprise that so many boards fail to perform. Boards typically are made up of a collection of CEOs and top executives from different industries. (continue reading… )


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