Corporate Governance by Derek Hendrikz
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Introduction to Corporate Governance by Derek Hendrikz covers definitions, objectives, core functions, primary drivers, stakeholders, stakeholder interests, controls, Anglo American Shareholder Model, Multi Stakeholder Model, strategic responsibility, Board of Directors, EXCO, Management, responsibility of the Board, Boards that have failed, principles of good governance, discipline, transparency, accountability, independence, responsibility, fairness, social responsibility,
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Corporate Governance by Derek Hendrikz
- 1. © Derek Hendrikz Consulting
- 2. Copyright © 2016 Derek Hendrikz Consulting www.derekhendrikz.com
- 3. Corporate Governance⊠A system of rules and practices by which organizational institutions are directed and controlled. © Derek Hendrikz Consulting
- 4. Objectives of Corporate Governance⊠1. Definition and distribution of rights and responsibilities amongst participants within an organization. 2. Specification of rules for decision-making. 3. Guidance in an appropriate strategy and structure that will facilitate the achievement of objectives. 4. Being a monitoring mechanism. 5. Alignment of stakeholder interests. © Derek Hendrikz Consulting
- 5. Core functions of Corporate Governance... © Derek Hendrikz Consulting
- 6. Primary drivers of Corporate Governance⊠1. Membership rights and privileges provided to members (shareholder- vs. stakeholder system). 2. Content of rights provided to members (decision-making powers, access to information, distribution of surplus, etc.) 3. Modes of representation made available to members (direct, indirect or âproxyâ representation). © Derek Hendrikz Consulting
- 7. External Stakeholders⊠⹠Shareholders ⹠Debt Holders (holder of a bond) ⹠Trade Creditors ⹠Suppliers ⹠Customers ⹠Affected Communities © Derek Hendrikz Consulting
- 8. Internal Stakeholders⊠⹠Board of Directors ⹠Executives ⹠Employees © Derek Hendrikz Consulting
- 9. Stakeholder Interest⊠Stakeholder: Interest: Directors, management & employees Salaries, benefits & reputation Investors Financial returns Lenders Specified interest payments Returns to Equity investors Dividend distributions and capital gain of stock Customers Certainty of provision of goods and services and appropriate quality Suppliers Compensation for goods and services and continued trade relations © Derek Hendrikz Consulting
- 10. External Controls⊠⹠Competition ⹠Debt covenants (company / creditor agreements on ratio limits) ⹠Demand for assessment of performance information (e.g. financial statements) ⹠Government regulations ⹠Managerial labour market ⹠Media pressure ⹠Takeovers © Derek Hendrikz Consulting
- 11. Anglo American shareholder model vs. Multi Stakeholder Model © Derek Hendrikz Consulting
- 12. Shareholder-Oriented Stakeholder-Oriented Maximizes shareholder value and looks after shareholder interests Looks after all stakeholder interests, especially public Seeks profitability and efficiency Less concerned about profit than value for money Hard-nosed and commercial Looks for survival, long-term growth and stability © Derek Hendrikz Consulting
- 13. Power belongs to the Shareholders Board represents that Power Delegates Accountable © Derek Hendrikz Consulting
- 14. Power belongs to the Stakeholders Board represents that Power Delegates Accountable © Derek Hendrikz Consulting
- 15. Shareholders Board Stakeholders © Derek Hendrikz Consulting
- 16. Strategic Responsibility⊠Authority Strategic Responsibility Board ⹠Purpose & Desired Reality ⹠Philosophy & Theoretical Model ⹠Accountability Rules ⹠Strategy & Scorecard Approval EXCO ⹠Strategic Objectives ⹠Master Processes ⹠Master Scorecard ⹠Structure ⹠Systems Requirement ⹠Culture Definition Management ⹠Action programmes & projects ⹠Detailed processes & procedures ⹠Target outputs and milestones ⹠Performance assessment ⹠Budgeting ⹠Resource allocation © Derek Hendrikz Consulting
- 17. Board of Directors⊠A body who, independently from the executive team, represents organizational shareholders in the governance and monitoring of the organization. © Derek Hendrikz Consulting
- 18. Objectives of the Board⊠1. To independently represent stakeholders of the organization. 2. To provide strategic direction to the organization. 3. To oversee accountability and compliance. 4. To monitor strategy execution and risk of non- performance. © Derek Hendrikz Consulting
- 19. Responsibility of Board⊠⹠CEO Selection and succession ⹠Strategic guidance ⹠Compensation of senior executives ⹠Monitoring of financial health ⹠Performance and risk ⹠Ensuring of accountability to investors and authorities © Derek Hendrikz Consulting
- 20. Where Boards have failed⊠⹠Enron ⹠Worldcom ⹠Adelphia Communications ⹠AOL ⹠Athur Andersen ⹠Global Crossing ⹠Tyco © Derek Hendrikz Consulting
- 21. Seven Principles of Good Governance⊠© Derek Hendrikz Consulting
- 22. 1. Discipline © Derek Hendrikz Consulting
- 23. 2. Transparency © Derek Hendrikz Consulting
- 24. 3. Accountability © Derek Hendrikz Consulting
- 25. 4. Independence © Derek Hendrikz Consulting
- 26. 5. Responsibility © Derek Hendrikz Consulting
- 27. 6. Fairness © Derek Hendrikz Consulting
- 28. 7. Social Responsibility © Derek Hendrikz Consulting