IntegratingCSR

Corporate governance can be defined as the system for direction and control of the corporation. Corporate Governance is the system by which companies are directed and controlled

Cadbury Report (UK), 1992

to do with Power and Accountability: who exercises power, on behalf of whom, how the exercise of power is controlled.
Sir Adrian Cadbury, in Reflections on Corporate Governance, Ernest Sykes Memorial Lecture, 1993

the process and structure..to direct and manage the business and affairs of the corporation with the objective of enhancing shareholder value, which includes ensuring the financial viability of the business.
Where were the Directors?

 Corporate governance involves a set of

relationships between a companys management, its board, its shareholders and other stakeholders ..also the structure through which objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.

fundamental objective of corporate governance is the enhancement of the long-term shareholder value while at the same time protecting the interests of other stakeholder.

Trusteeship obligations inherent in company operations, where assets and resources are pooled and entrusted to the managers for optimal utilization in the stakeholders interests.

Corporate governance is essentially about leadership:

-leadership for efficiency; -leadership for probity; -leadership with responsibility; and -leadership which is transparent and which is accountable.
- PRINCIPLES FOR CORPORATE GOVERNANCE IN THE COMMONWEALTH

Corporate governance is holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. The incentive to corporations is to achieve their corporate aims and to attract investment. The incentive for states is to strengthen their economics and discourage fraud and mismanagement.

The Manner in which a Corporation is Run

-Achieving its Objectives -Transparency of its Operations -Accountability & Reporting -Good Corporate Citizenship

The Processes & Operating Relationships that Best Achieve Organizational Goals

Transparency Accountability Fairness Responsibility

Finance or the Principal-Agent Model

-Markets for Capital, Managerial Talent and Corporate Control, Key determinant -In general, profit-maximization goal is cofunctional with social-welfare-maximization -Shareholders as Residual Claimants have superior control rights

Risk-bearing Entrepreneurs Residual Claimants Winding-up Ranking: Last in Pecking Order Boards Appointed by Shareholders Non-congruence of Stakeholder Interests

shareholders residual claimants to the firms income. Creditors have fixed claims and employees remunerations negotiated in advance of performance .. Gains and losses from abnormally good or bad performance .. The lot of shareholders, who stand last in the queue .. Shareholders make discretionary decisions and bear consequences .. As such, .. Owners of business with important control rights

One-Size does not Fit All Circumstances A Combination of Shareholder/Stakeholder Models Necessary Some Argue, While Shareholder Claim Well Established, Stakeholder Claims Need to be Proved Tailor Model to Suit Unique Circumstances

Central to Corporate Governance

-Juxtaposed between Shareholders on the one hand, and on the other, Managers of the Entity (Cadbury) -Follows Distancing between Ownership and Control (Berle and Means) -Trustee for All Shareholders -Loyalty & Commitment Always to Company

Provide/ Exercise
-Leadership and Strategic Guidance -Objective Judgment Independent of Management -Control over the Company

Direct and Control the Management of the Company Be Accountable at all times to All Shares

Direction involves
-Formulation & Review of Company Policies, Strategies, Budgets and Plans, Risk Management Policies, Top Level HR Policies, etc -Setting Objectives & Monitoring Performance -Oversight of Acquisitions, Divestitures, Projects, Financial and Legal Compliance, etc

Control Involves
-Prescribing Codes of Conduct, -Overseeing Disclosure & Communication Processes, -Ensuring Control Systems to Protect Company Assets -Reviewing Performance & Realigning Action Initiatives to Achieve Company Objectives

Accountability Involves
Creating, Protecting and Enhancing Company

Wealth and Resources Timely and Transparent Reporting Good Corporate Citizenry including Discharge of Stakeholder Obligations and Societal Responsibilities without Compromising the Shareholder Wealth Maximization Goal

Regulators (SEBI/RBI)

Government Stock Exchanges Legislation Listing Agreements

Lenders (Banks/ Depositors)

Listed Corporations (The Board & the Executive)

Shareholders/ Stakeholders

Market Operators (Rewards)

Institutional Investors Press/Media (Pension Funds/Insce Cos) (Opinion Makers)

Market Operations, Critique & Monitoring

Shareholder versus stakeholder models Private versus public roles in controlling corporations One size fits all versus tailormade

Rise of institutional investment - other peoples money Privatization the corporation dominates the economy Deregulation/Liberalization competition and mobile money Crisis and scandals no market is immune

 Ethics is the distinction we make between

-right and wrong, good and evil, in relation to - actions, intentions or character

Ethics is Standards, Rules, Morals Ethics is the science of human duty But will we agree about what is good?
-about the duties of those who govern?

First lets think of something simpler

For driving a car to be thought good or right what should the driver do? Obey the Rules
-Speed limit. Not too fast! Not dangerously. (Note speed a matter of fact, dangerous of judgement) -KEEP LEFT! (or right?), no absolute but need to agree

Get the Results

Build Relationships

-Get there on time! Stay safe! (compromise)

-With other drivers. Win passengers trust.

People are: More literate - more people more educated

More informed (two decades global TV, internet) Find new opportunities with new technologies Want better treatment, products, service, fair play
-that require better policies and management

-over last 40 or 50 years, two generations?

Governance an issue in private sector for workers, customers, shareholders

1940s-1960s many thought Government would treat people better, more fairly than private sector
-USSR, Europe, others chose command economies -US alliance of government, unions, corporations

Disillusion! Government service poor, not fair

-government bad, private sector good

+ educated demanded rights, and: Globalisation of business (& crime) End of cold war; but Terrorist threats

1989. World Bank Long Term Perspective Study on Sub-Saharan Africa

Africa needs less government but better government less direct intervention, more enabling others to be productive [with] political renewal, attack on corruption, accountability, public debate, empowering women and the poor None of these measures will go far unless governance improves.

Then Marxist regimes fell in Europe and world leaders enthused about governance
- Mitterrand, OAU heads, (Thatcher)

Those who take employment in public service expect to obey rules and regulations Everybody obeys laws national rules - in daily life We may accept rules as coming by divine revelation, or with the authority of community or organisation, or as part of being human
-a universal law, found by reason (as suggested by Kant) -categorical imperative, conscience-driven?

 Rules may enforce tyranny - a rule by law -where the law protects rulers from their citizens, -when we want a rule of law, where the law protects citizens from each other AND from their rulers Rules inhibit innovation, promote inflexibility -through failing to keep pace with change Rules Multiply! -in efforts to keep pace with changes So we use rules, but to change rules we need something more

In our work we are expected to get results; the utilitarian principle focuses attention on results explained as seeking the greatest good for the greatest number That is difficult to operationalize to estimate In practice we avoid causing hurt and thus often judge actions by expected results
-for example to protect the environment -the greatest benefit from now to eternity

 A Results Ethic allows the ends (protect society) to justify the means
-Someone who is not prepared under any circumstances at all to sacrifice the innocent, or to plan murder, is not a utilitarian at all (Almond 1998)

So we shall not be utilitarians, but we use a utilitarian ethic when we judge actions right or wrong because of their consequences

 Confucius proposed a golden rule of caring: -Do not do to others

what you would not have them do to you -a principle of reciprocity - although called a rule the focus is relationships

Jesus Christ spoke similarly:

-Do to others what you would have them do to you

A results based ethic focused on people People focus places value on trust

 A colleague of Confucius wanted public servants NOT to be too virtuous!

-The virtuous would favour family, be unfair to others -Danger of an economy of affection, as described by Hyden for an African country in 1970s -our families, communities, other humans
-Dilemma when driving with a friend

But a Relationships Ethic values people:

Rules, results, relationships may conflict

What we should do is what has been done

-because it has always been this way

Sanctions came from family and ancestors Traditional ethics was based on tradition A consensus set limits to power or corruption
-if broken, society fragmented

Ethics was determined by rules from the past

An Enlightenment brought change -reason was given more importance -progress was expected -in technology; in society (Karl Marx, etc) -choices were based more on expected results than past patterns Ethics looked at results, the future -and was more relativistic, with an absolute that there are no absolutes

A culture defined by what it is not Lost confidence in progress, science, reason No confidence in guidance from the past No pattern or meaning to life, no metanarratives
-shown in art, architecture, etc

But concerns about human rights, globalisation, poverty, etc, suggest a concern for relationships remains Public service priorities show same trend?

Different patterns of behaviour are judged right in different situations We shall need to recognise this when we consider the relevance of culture HERE IS AN EXAMPLE Why might I be right to choose my cousin for a job in my own small business, but wrong to appoint her or him to work in my Government Department?

Cultures are associated with religion Religious teachers and their teachings about fraud and corruption indicate long-standing attitudes in societies We find that theft and murder are condemned
-Without reason why (considered obvious?)

Bribery is condemned because it is unfair

-it hurts people, a RELATIONSHIPS ethic

What ethical issues are likely to concern us? For example (in any organisation): -unfair appointments and promotions sexual harassment and bullying health and safety regulations avoiding conflicts of interest reducing risks of corruption
-with its costs, damage to reputation

Think of rules, results, relationships

Integrity can I live happily with this choice? am I at ease with my conscience? Transparency am I happy for others to know? and the press to report what I do? Accountability do I report to others? can they check my reports?

Reciprocity -Would I feel no hurt or anger if others did the same? Suspicion Would reports about my action give others reasonable grounds for suspicion? Commitment Am I determined to promote integrity and to help prevent corruption?

Advice to Moses ,
Look for able men who fear God, are trustworthy and hate dishonest gains; set them as officers over thousands. Let them sit as judges.

The Law of Moses ,

You must not distort justice; you must not show partiality; and you must not accept bribes for a bribe blinds the eyes of the wise and subverts the cause of those who are in the right.

THEN JUDGES RULED THE LAND

Whats good about anything? Can we find a good about governance on which people everywhere would agree? Trying to decide whats good: THATS ETHICS.

1.

2.
3.

Outline the evolution of management theories and traditional management functions and skills. Describe the importance of leadership and the strategies that ensure its success. Explain how intense and humble leadership skills can take a spa from good to great.

4.
5. 6.

Define the eighth habit of effective leaders and how they can develop it. Identify specific leadership needs experienced in spas. Explain why ethical leadership is essential and the specific issues that affect a spa.

Planning Organizing Coordinating Staffing Directing Controlling

Technical skills Human relations skills Conceptual skills

Strategy I: Attention through vision Strategy II: Meaning through communication Strategy III: Trust through positioning Strategy IV: Self-development

Had a transition point from good results to great results Maintained the results for at least 15 years Averaged cumulative stock returns that were 6.9 times the general market for those 15 years

Level One: Highly capable individual makes productive contributions Level Two: Contributing team member contributes capabilities to achievement of group objectives Level Three: Competent manager organizes people and resources toward pursuit of objectives

Level Four: Effective leader catalyzes commitment to and pursuit of a clear and compelling vision Level Five: Executive builds enduring greatness through a paradoxical blend of personal humility and professional will

Analyzing financial statements Forecasting and budgeting Practicing revenue management Creating marketing and public relations initiatives Developing a compensation program Managing retail inventory continued)

Maintaining a customer feedback system Practicing strong human resources skills Developing a sense of place and design Organizing the workplace and attaining efficiency Controlling risks in the workplace

Be proactive Begin with the end in mind Put first things first Think win/win Seek first to understand, then to be understood Synergize Sharpen the saw

Freedom and power to choose Natural laws or principles that are universal Four intelligences and capacities

Mental Physical Social/emotional Spiritual

Modeling (conscience) Path finding (vision) Aligning (discipline) Empowering (passion)

Managing healers Strategic intent and transformational experiences Authenticity Communication

Pursuing purpose with passion Practicing solid values Leading with heart Establishing enduring relationships Demonstrating self-discipline

Keep it simple Explain or provide an example Use clear, direct words Respect your listeners Repeat the main idea Check for understanding

Paying undivided attention Attaching meaning Evaluating the message Responding and remembering

Interrupting Prejudging Script-writing Reacting Emotionally

Managing an ethical environment Relations with customers and employees Honesty Employee privacy rights Alcohol/drug testing Environmental issues Relations with foreign governments Codes of ethics and self-governance Employee abuse of alcohol or drugs

Ethics of governance
Ethics is the reason for

Governance of ethics
A companys ethics

corporate governance reports Every aspect of corporate governance is grounded in ethical values
Board responsibilities Risk management Internal audit Sustainability

performance needs to be actively governed and managed By means of a ethics programme

Ethics is not an optional add-on to normal business, nor it is a soft issue. All business strategies and operations have an ethical dimension that we cannot escape as we cannot escape our own shadow. Ethics holds enormous risks for companies, but more importantly creates reputational and competitive opportunities.

Ethical leadership Ethical leadership really has two elements. First, ethical leaders must act and make decisions ethically, as must ethical people in general. But, secondly, ethical leaders must also lead ethically in the ways they treat people in everyday interaction, in their attitudes, in the ways they encourage, and in the directions in which they steer their organizations or institutions or initiatives.

Ethical leadership is both visible and invisible. The visible part is in the way the leader works with and treats others, in his behavior in public, in his statements and his actions. The invisible aspects of ethical leadership lie in the leaders character, in his decision-making process, in his mindset, in the set of values and principles on which he draws, and in his courage to make ethical decisions in tough situations.

Ethical leaders are ethical all the time, not just when someones looking; and theyre ethical over time, proving again and again that ethics are an integral part of the intellectual and philosophical framework they use to understand and relate to the world. Some important components of ethical leadership (well discuss these more later under How do you practice ethical leadership?):

The ability to put aside your ego and personal interests for the sake of the cause you support, the organization you lead, the needs of the people you serve, and/or the greater good of the community or the world. The willingness to encourage and take seriously feedback, opinions different from your own, and challenges to your ideas and proposed actions.

The encouragement of leadership in others. Making the consideration and discussion of ethics and ethical questions and issues part of the culture of the group, organization, or initiative. Maintaining and expanding the competence that you owe those who trust you to lead the organization in the right direction and by the best and most effective methods.

Why practice ethical leadership? Most people would probably agree that leaders ought to be ethical (although there might be a lot of disagreement about what that means), but there are a number of good reasons why ethical leadership makes sense. 1. Ethical leadership models ethical behavior to the organization and the community. Leaders are role models. If you want your organization or initiative and those who work in it to behave ethically, then its up to you to model ethical behavior. A leader and an organization that has a reputation for ethical behavior can provide a model for other organizations and the community, as well.

Accepting responsibility and being accountable. Perhaps most important, understanding the power of leadership and using it well sharing it as much as possible, never abusing it, and exercising it only when it will benefit the individuals or organization you work with, the community, or the society.

2. Ethical leadership builds trust. Leadership except leadership gained and maintained through the use of force and intimidation is based on trust. People will follow an ethical leader because they know they can trust him to do the right thing as he sees it. 3. Ethical leadership brings credibility and respect, both for you and the organization. If youve established yourself as an ethical leader, individuals and groups within and outside the organization, will respect you and your organization for your integrity.

4. Ethical leadership can lead to collaboration. Other organizations will be much more willing to collaborate with you if they know that youll always deal with them ethically. 5. Ethical leadership creates a good climate within the organization. If everyone in the organization knows that power will be shared and not abused, that theyll be dealt with respectfully and straightforwardly, that theyll have the power to do their jobs, and that the organization as a whole will operate ethically in the community, theyre likely to feel more secure, to work well together, and to be dedicated to the organization and its work.

6. If you have opposition, or are strongly supporting a position, ethical leadership allows you to occupy the moral high ground. This is especially important if your opposition is ethical as well. You can look very small in comparison if your ethical standards are not up to theirs, discrediting your cause and alienating your allies.

7. Ethical leadership is simply the right way to go. Everyone has an obligation to themselves, to their organization, to the community, and to society to develop a coherent ethical system that seeks to make the world a better place. Leaders, for the reasons already stated, and because of the responsibilities of leadership, have a particular obligation in this respect. 8. Ethical leadership affords self-respect. Because you know that you consistently consider the ethics of your decisions, actions, and interactions, you can sleep at night and face yourself in the morning without questioning your own integrity.

Finally, and perhaps most important, an ethical leader never stops reexamining his own ethical assumptions and what it means to be an ethical leader. Like so many other important tasks, maintaining ethical leadership is ongoing; like only a few others, it can last a lifetime.

Take responsibility for educating your managers about corporate responsibility & business ethics Top management needs to make sure there are visible & supported programs
do not rely upon individual ethics & the character

of employees alone

Are business ethics & social responsibility directly related to financial performance?

Greater efficiency in daily operations Greater employee commitment Improved financial performance Higher product quality Improved decision making Increased customer loyalty Improved reputation

Trust is the glue that holds organizational relationships together Stephen Covey contends, low trust results in organizational decay & relationship deterioration
political problems & inefficiency

Most workers feel they can be trusted more than they can trust others

All organizational members should share a sense of trust Trust should exist between departments within a firm Ethics Resource Center study shows that 93% of employees who say trust is frequently evident in their organization report satisfaction with their employer

Provide significantly lower returns on assets & lower returns on sales than firms that have not been convicted Organizational misconduct can result in:
-loss of reputation -supplier concerns -investor concerns -greater government scrutiny

What is Corporate Governance

The importance of corporate governance lies in its contribution both to business prosperity and to accountability.

Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals The aim is to align as nearly as possible the interests of individuals, corporations and society. Sir Adrian Cadbury Corporate Governance Overview, 1999 [World Bank Report]

Paragraph 1.1, Committee on Corporate Governance: Final Report Hampel Committee

Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

Defining key board roles

- Board Chairman - Chief Executive Officer - Board Directors - executive and non-executive

Putting in place board governance arrangements

- Board committees to support decision process - Supporting functions to regulate processes - Board procedures and rules, e.g. conflicts of interest - Delegated authorities for management - Management reporting and public disclosures - Assurance processes and controls

Ensuring proper oversight and supervision

The board should exercise compelling and relentless leadership and should not underestimate the power of leading by example - evidenced by high levels of visibility and integrity, strong communications, and demanding expectations. This leadership should be clear to ALL within the organization, as well as shareholders (accionistas) and other stakeholders (grupos de inters).
Boardroom Behaviours A report prepared for Sir David Walker by the Institute of Chartered Secretaries and Administrators , UK June 2009

Shareholders
Board of Directors

Chairman
Board Meetings Corporate Secretary
Reporting & Disclosure

Achievement of strategic objectives and value creation Fulfil responsibilities and duties in law and prescribed functions

Board Operations

Strategy
Corporate Policies & Procedures

Board Governance Instruments

Monitoring and Evaluation CEO & Management

Governance System and Controls

Board Committees

Audit Remuneration Other Executive Committee Committee Committee Committees Combined Assurance Model Other Assurance Internal Audit External Audit Providers

Internal Controls & Assurance

Management

Key Areas of Responsibility

Information and Communication

Primary role
Function
- Provide overall leadership to the board -Principal link between board and CEO/management team -Responsible for board agenda and work plan -Work with board committee chairmen - Involved in selection and induction of new directors - Counsel individual directors on their performance -Participate in discussions with investors, key stakeholders

Primary role
Function
- Lead the management team, reporting to the board - Work closely with board chairman - Responsible for performance of management team - Formulate corporate strategy, annual business plan and budget - Responsible for corporate and financial objectives - Formulate major corporate policies - Ensure continuous improvement in services and products - Manage relations with investors, major customers, regulators - Responsible for companys long-term sustainability

Balancing executive and non-exec. participation Ensuring an effective selection process

-Key personal and professional attributes - Skills aligned to strategy and business - Also fill board committee requirements, where appropriate - Must have time to devote to responsibilities -Must exercise judgment in best interests of company - Must be informed about the business and its markets - Must avoid interest conflicts between personal and business - Must treat board information confidentially - Should act objectively and be receptive to other perspectives -Should prepare adequately for meetings, regular attendance

Some general guidelines

Assist the board in its decision making

- Brings together non-executives and management - Allows detailed discussion on management matters - But, filters out operational issues that remain with management - And, focuses on strategic decisions required of the board - Audit, internal controls and risk -Executive compensation and management appointments - Governance issues and corporate policies - Nomination and selection of non-executive directors - Others, e.g. health, safety, environment, etc.

Supports board responsibilities in key areas

Defined terms of reference and limitations Generally, no executive powers

Board Charter setting out procedural rules

- Clarifies leadership roles and core responsibilities - Reserves matters specifically reserved to board - Sets management delegations and reporting arrangements - Legal and regulatory obligations - Financial structure of business, budgets and KPIs - Understanding of strategic priorities and current status Familiarize with business operations, e.g. site visits - Meetings and budget cycle, annual reporting

Comprehensive induction for new directors

Annual board work plan

Code of ethics or statement of business principles

- Defines corporate values and conduct of staff and directors

-Duty to maintain proper accounting records

-Periodic reporting of financial position, performance -Establishing, monitoring proper internal controls

Ensuring proper external controls and audit

Skills, knowledge required by directors

The BOD Continuum

Low Monitor (40%)
Permit officers to make all decisions. Formally reviews selected issues Votes as officers recommend on actions.

Degree of involvement Evaluate & Influence (30%)

Involved in review of selected key decisions, indicators or programs of management Approve, question & makes final decisions on mission, objectives strategy & policies. Perform fiscal & mgt audits.

High Initiate & Determine (30%)

Take leading role in establishing & modifying mission, objectives, strategy & policies. Has very active strategic committees

Boards must re-establish and enforce the standard that risks are to be undertaken for the benefit of their constituents, not for the personal gain of management.

Top management is primarily responsible for the strategic management of the firm
-Responsible for every decision & action of every organizational employee -Responsible for providing effective strategic leadership -Strategic leadership is the ability to anticipate, envision, maintain flexibility, think strategically, and work with others in an organization to initiate changes that will create a viable and valuable future for the organization

Do I believe I have all the information? Have I the necessary skills to make this decision? Do I have any conflict in this matter? Objectively, is this a rational business decision? Can I explain this in a transparent manner? Is it a responsible discharge of my duties?

Build Trust and Credibility! Respect for the Individual Create a Culture of Openness and Honesty Set the Tone at the Top
Uphold the Law! Avoid Conflicts of Interest Set Metrics and Report Results Accurately Do the Right Thing! Promote Substance over Form Be Loyal to your Company, your Family, yourself

The concept of social responsibility

-Proposes that a private firm has responsibilities to society that extend beyond making a profit -Obligation of firm decision makers to make decisions & act in ways that recognize the interrelatedness of business & society. -It recognizes the existence of various stakeholders and firms deal with them

Two Views of who are firms responsible to? (1) Traditional View (Milton Friedman)

There is one and only one social responsibility of

business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (M. Friedman, The Social Responsibility of Business is to Increase Profits, New York Times, (September 13, 1970: pp. 126-127)

(2)Modern View (Archie Carroll)

-Business firms have four responsibilities (a) Economic
Produce goods & services of value to society so that the firm may repay its creditors and stockholders

(b) Legal
Defined by governments in laws that management is expected to obey

Modern View (Continued)

(c) Ethical
Follow generally held beliefs about how one should act in society
Work with employees & community in planning for layoffs, though no laws requiring this Many people expect firms to do these things

(d) Discretionary
Purely voluntary obligations a firm assumes
Philanthropic contributions, training hard-core unemployed, providing day-care centers, etc. Many people do not expect firms to do these things

Stakeholders are individuals, groups or institutions who have a stake in or are significantly influenced by an organizations decisions and actions
-Shareholders -Governments -Political & social action groups -Employees -Customers -Communities -Suppliers Trade Associations

Corporate governance refers to the processes and structure by which the business and affairs of the company are directed and managed, in order to enhance long term shareholder value through enhancing corporate performance and accountability, whilst taking into account the interests of other stakeholders.

the lifting of peoples vision to a higher sight, the raising of their performance to a higher standard, the building of their personality beyond its normal limitations (Drucker, 1985).

The ability to lead, including inspiring others in a shared vision. Leaders have clear visions and they communicate these visions to their employees. They foster an environment within their companies that encourages risk taking, recognition and rewards, and empowerment allowing other leaders to emerge

Relationship Between Shareholders, Board and Management: Legal Perspective Board of Directors
Shareholders (Management)

Structural or constitutional decisions [issue of shares; reduction of capital] Appointment / removal of directors & auditors Directors compensation [e.g., retirement and compensation benefits for directors; provision and improvement of directors emoluments (fees, benefits etc)] Disposal of substantially the whole of the companys undertaking

Assignment of office by director or manager Schemes of arrangements & takeovers Winding up Conflict of interest situations [e.g., related party transaction rules; payment of commissions etc to directors in connection with the transfer of undertaking or property of the company]

(1) The business of a company shall be managed by or under the direction of the directors. (2) The directors may exercise all the powers of a company except any power that this Act or the memorandum and articles of the company require the company to exercise in general meeting.

Questions:

In your organisation, does your board and CEO have a clear understanding as to the matters that require the boards approval? Are many matters left to the CEO judgement as to whether Boards approval is required? Should the Board always make a decision when asked by the CEO?

In my family, my husband makes all the major decisions. So far, there have been no major decisions.
Anonymous (not my wife)

Wondering aloud how the board of directors allowed itself to be almost completely captured by the former CEO, he said: No organisation can leave just one man to make decisions. Like in old China, when the emperor says this, and thats it, things are done.

Board of Shareholders Directors Governance Risks

Management

Board of Shareholders Management Directors

Character
Competence Commitment

Implement comprehensive code of conduct emphasising ethics from the top Implement whistleblower arrangements Clarify the boards and CEOs roles (develop board charters/board delegation guidelines) Implement proper framework for internal control and risk management systems Pay more attention to succession planning

Introduce legislation protecting whistleblowers Make independent directors more accountable disqualify those who are grossly negligent? Increase transparency of ownership (look at nominee ownership issue/disclosure of substantial shareholdings) Consider allowing cumulative voting for directors Reconsider the nature of interested party transactions

Creating the right Culture -Business Culture A corporate culture is the sum of the unwritten norms, beliefs and values that define appropriate behavior
-Like human personalities, corporate cultures result from the interaction of temperament and experience Over time, their dictates slip from the consciousness into the realm of habit:

Changing the culture is the most nebulous area of corporate management, by far the most challenging It is about changing the often unspoken values and beliefs that guide any organizations conduct -Executive power cannot accomplish much here Subordinates voluntary cooperation becomes essential

-The difficulty of the task is such that even revolutionary leaders usually place cultural change last on their agendas -However, no transformation is complete without it

Control your destiny or someone else will

Culture as it should be The way in which a group of people solves problems and reconciles dilemmas Creating the right business culture Could transform a company Make the difference between success & failure Create significant increase in stakeholder value

What is the most important driver of innovation for companies? Supportive Corporative Culture (53%) Top Management Support (21%) Clear Processes and Measurable Goals (13%) Creative Talent (5%

Engage the workers hearts and minds Direct correlation between employee engagement and the productivity, profit and revenue growth Employees who contribute the most to corporate performance also tend to Trust management Be stimulated by their jobs Believe their work affects corporate performance See opportunities for career growth Take pride in the company Have co-workers who feel the same way Believe the company wants to help build their skills Like their bosses

Build and protect the culture "Stay focused on culture, people, and values; it is the area most likely to get compromised in this environment If you dont invest in the future and dont plan for the future, there wont be one Companies that nurture flexibility, awareness and resiliency are more likely to survive the crisis, and even to prosper.
-George Buckley, CEO of 3M
-Eric Foss, Chairman & CEO of Pepsi Bottling Group

Think about The culture that exists in your business What have you done to create / change that culture?

Ask yourselves the following questions

-Being forward looking, envisioning exciting possibilities and enlisting others in a shared view of the future -This is the attribute that most distinguishes leaders from non-leaders -What leaders struggle with the most is communicating an image of the future that draws others in that speaks to what others see and feel Leaders need to listen closely to others -Appreciate their hopes -Attend to their needs

Engaging Others Engagement is not just about conversation Small voices can silence a room if used at the right time

What is the most important driver of innovation for companies? Supportive Corporative Culture (53%) Top Management Support (21%) Clear Processes and Measurable Goals (13%) Creative Talent (5%)

McKinsey Study Innovation: Whats your score? Berwig, Marston, Pukkinen, Stein
Business model innovation tends to generate bigger gains than product or process innovation Harder for competitors to copy

-Strong innovators do consistently well as regards stockmarket performance

Top innovators continued to outperform their peers even during the tough times Agility & capacity to innovate made it easier to cope with challenges Many important products have been introduced during times of crisis

Digital computers were born during the Great Depression The Ethernet during the 1970s oil crisis The IBM personal computer in the early 1980s recession The World Wide Web emerged from the recession of the early 1990s During the last recession (in the early 2000s), innovative companies began staking out new leadership positions via the Internet. - Apple changed the business model in the music industry when it launched its popular iPod music player synched to its popular iTunes music store Google became an online industry leader by linking its search engine to advertising

-To become a world-class center of innovation, a society/organization / business must have three basic elements Drive A culture that supports change and hungers for it -Human Capital The personal abilities that make world-class innovation possible -A capacity for mobilization a societys ability to pursue ambitious new goals

Need to embed growth into the DNA of a company Leadership traits necessary for innovating, creating new businesses and expanding into new markets External focus
-Clear thinking Communicates clearly and concisely
-Imagination Takes risks; displays courage and tenacity

Inclusiveness
-Expertise Has domain knowledge; continuously develops self; loves learning

Risk-taking Critical Success Factors.

Constantly step back and think about organizational effectiveness. View this as your company. Every action should be justified by asking yourself Would I do this if I owned the company

Encourage risk taking. -It is okay to make mistakes The most important things are What did you learn from the experience?

What do you do to prevent such a mistake from happening again?

Learn from the past but do not focus too much on the pastUse the past to make the future a brighter one People who focus too much on the past will get confined to the history heap.

Methods for reducing or eliminating conflicts Conflicts between nations, within governments, between companies and governments, between and within companies, between individuals Usually involves tools such as negotiation, mediation, and diplomacy Always involves communication

International Trade Intellectual Property Labor Cases Tax Cases General Commercial (joint ventures, M&A) Product Liability Anti-trust cases (anti-competitive issues)

Personnel Management Productivity Sales Subcontractors Delivery Customer Service Overseas affiliate issues

Individualistic Culture
More contentious, shorter term approach; Want answers now and clearly outlined; Less likely to negotiate, and if they do, prefer to do so on their own terms; Can walk out of talks, especially if must answer to constituents

Collectivistic Culture
More consensual, longer term approach; Want to develop a longterm positive relationship; More likely to negotiate, and when they do, more likely to cooperate; More likely to concede or engage in problem solving

Putting it all together to steer a business

-History shows there are great opportunities during recessions More companies
achieve dramatic gains during recessions than during expansions

Take your business from your current position in the downturn to a stronger leadership position when the economy recovers by Cutting the right costs in the right way while sustaining
margins and brand

Targeting the right customers, maximizing revenue while building your brand -Preparing for bold moves, such as game-changing acquisitions -Differentiating your firm as one of this recessions breakaway outperformers

As a leader you need to:

-Manage current resources while identifying new opportunities -Lead change amid new challenges

Difference between merely surviving the downturn and emerging from it stronger

Forecasting Tell it like it is; Do not sugar-coat it Understand and adapt to drastic shifts in market and consumer behavior Consumers are likely to display substantially altered preferences and tendencies as a result of their experiences in a recession

Do not be afraid to take action and change things, even if a business is doing well Do not be afraid to take risks but manage risks carefully Need courage to make hard decisions quickly

Need appropriate mechanisms and governance models to confront multiple scenarios Be receptive to different points of view Do not create a blame culture Communicate, Communicate, Communicate The only way to address uncertainty is to communicate and communicate; and when you think you have just about got to everybody, then communicate some more Terry Lundgren, CEO of Macys.

Growth potential
According to French automaker Peugeot, Iran has one car for every 21 inhabitants. Turkey has one for every 12. Western European countries and Japan have nearly one car for every two people. That indicates tremendous market growth potential, and in part explains substantial foreign car manufacturer interest in the Iranian market. Iran's domestic vehicle production is growing quickly. In the first quarter of the Iranian year starting March 20th, Iran produced 187,135 light and heavy vehicles, including 165,000 automobiles; 52,500 Pride models were manufactured, followed by 31,100 Paykan cars and 19,500 Peugeot 405 injection models. In July, Iran resumed the importation of foreign cars following a 10-year break.

The import arrangement includes 130 percent customs fees, and a 10,000-car total to yearend. The customs fees are intended to support the domestic car industry, as well as facilitate the import of cars to meet the chronic shortage of new vehicles. This fits with the stated interests of Iranian manufacturers.

The import fees will generate some 6 trillion rials ($760 million) for the government in the current Iranian fiscal year. Joint ventures. Over the last few years several major automobile manufacturing companies from have traveled to Iran to explore opportunities there.

In May, French company Renault-Nissan formed a joint-venture car manufacturing company called Renault-Pars to produce light passenger vehicles in Iran. Fifty-one percent of the company's shares are owned by Renault-Nissan, and the remaining 49 percent by the Automotive Industry Development Company, a concern owned by the Iran's two main governmentcontrolled carmakers, the Saipa Group and Iran Khodro.

In 2006, Renault-Pars will produce the Logan under Renault license, a vehicle based on Type B of the L90 series of Renault automobiles. Currently manufactured in Romania, there are also plans to produce the Logan in Russia, Morocco, Colombia and possibly China.

According to Andreas Gabriel, managing director of Renault-Pars, the Logan will be sold in the Iranian market for 65-80 million rials. Half the L90 production volume will be targeted for exports to 26 countries. Schweitzer, said the company has a startup production capacity of 150,000 units per year with an initial capital of 300 million Euros.

Export markets
The cars will be assembled by BAMCO, a subsidiary of Kerman Automotive Industries, and will be sold in Iran by an exclusive dealer network owned by Modiran Pars Co., another Kerman subsidiary. The 1.8-liter four-door Comfortline version of the Gol is essentially a stripped-down version of the VW Golf developed in Brazil. VW also sells Gol with some success in Argentina, Mexico, China, South Africa and Eastern Europe. In its tie-ups with foreign car manufacturers, Iran hopes for technological exchange. Toward the end of July, Minister of Industries and Mines Es'haq Jahangiri in a meeting with the managing director of Renault-Nissan Alliance called for cooperation between the research departments of France's Renault and Iran Khodro as well as Saipa. We need the expertise of the French Renault Company in designing the automobile body, he added.

In response, Schweitzer said: "It is a joint undertaking for full transfer of technology to the Iranian partner." The size of the Renault-Pars investment at 300 million euros is a significant gesture of faith in Iranian industry.
The amount nearly equals total foreign investment in Iran by French companies in 2002. Renault's investment is the first large-scale, longterm direct investment in Iran by a French company since the 1979 revolution. It could help pioneer further foreign investment flows into the country. Iran could also graduate into becoming a substantial car exporter. In June, Iran plans to export $150 million worth of automobiles by the end of 2004, $350 million in 2005, and $1 billion in four years. Besides partnering foreign companies in Iran, the country is also exploring opportunities for partnerships in other developing countries.

Thank

you