Professional Documents
Culture Documents
Tech Execsum Enterprise Governance 0804
Tech Execsum Enterprise Governance 0804
Figure 1 illustrates the reach of enterprise governance. In This dimension does not lend itself easily to a regime of
general, the conformance dimension takes an historic view standards and audit. Instead, it is desirable to develop a
while the performance view is forward-looking. It makes it range of best practice tools and techniques, such as
clear that good corporate governance is only part of the scorecards and strategic enterprise systems, that can be
story – strategy is also important. applied intelligently within different types of organisation.
These can help boards to focus on strategic direction and its
Conformance is also called “corporate governance”. It covers implications for all areas of the business. But these are not
issues such as board structures and roles and executive often dealt with as a coherent whole by the board, what we
remuneration. Recent high-profile cases of corporate failure would term an “oversight gap”. In this project we explored
such as Enron, HIH, Tyco, Vivendi, Royal Ahold and, most whether this was a significant issue.
recently, Parmalat, have brought corporate governance to
the top of the business and political agenda. This has led to At the heart of enterprise governance is the argument that
a number of reviews at national and international level. good corporate governance on its own cannot make a
Codes and/or standards can generally address this dimension company successful. Achieving a panacea of good corporate
with compliance being subject to assurance/audit. There are governance that is linked strategically with performance
also well-established oversight mechanisms for the board to management will enable companies to focus on the key
use to ensure that good corporate governance processes are drivers that move their business forward. This is both a
effective eg, audit committees. challenge and an opportunity.
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The aim was to provide summaries of the causes of Principal findings from the case studies
corporate successes and failures (as defined by total collapse There were four key corporate governance issues that
of the company or severe difficulties resulting in sharp underpinned both success and failure. These were:
declines in share price and profits, adverse publicity etc). Of • culture and tone at the top;
the 27 case studies, 11 were “successes” and 16 were • the chief executive;
“failures”. • the board of directors;
• internal controls.
Each case study focused on corporate governance practices
and strategic issues such as the process of strategy For example: “Enron didn’t fail just because of improper
development and the resulting choice of strategy. Material accounting or alleged corruption at the top. It also failed
was drawn from published sources. Our approach was to because of its entrepreneurial culture ... The unrelenting
develop case studies that were sufficient to generate broad emphasis on earnings growth and individual initiative, coupled
conclusions. The case studies are not intended to be with a shocking absence of the usual corporate checks and
detailed, rigorous pieces of academic research. balances, tipped the culture from one that rewarded
aggressive strategy to one that increasingly relied on unethical
These were then analysed in terms of two categories, each corner-cutting.”
with two subsets as follows: (Business Week online, 25 February 2002).
Corporate governance – what went wrong in failure and “Williams was, in reality, chief executive [of HIH] from the
what went right in success eg, inception of the business until he stepped aside in October
• the role of the chief executive 2000. No one rivalled him in terms of authority or influence.
• the role of the board of directors Even as his business judgment faltered in the second half of
• executive remuneration the 1990s he remained unchallenged. No one else in senior
• ethics, culture and tone at the top management was equipped to grasp what was happening and
to bring about a change of direction for the group. There was
Strategy – what went wrong in failure and what went right a lack of accountability among senior management and the
in success eg, board of directors, and there was a singular failure to assess
• mergers and acquisitions performance in the context of deteriorating financial results”
• responsiveness and information flows (Report of the HIH Royal Commission, 2003).
• risk management
• strategy execution
4 Enterprise Governance Executive Summary
A practical framework is presented which pulls together all the Stage 6 – finalise the deal
elements required to integrate the management and There is a need for a formal sign off before the deal is
consideration of risk with the management of the business. finalised. This can take the form of a sponsor’s note which
This is discussed in more detail in the full report. provides a final summary of the key points.
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