Mastering Global Corporate Governance E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: IMD Executive Development Series
• Sprache: Englisch

Seitenzahl: 254

Veröffentlichungsjahr: 2015

Beschreibung

Corporate Governance is the hot topic of the new millennium. Gone are the days when CEOs set agendas and earned 500 times more than average employees. Now, transparency rules. Corporations must establish new systems of accountability, and encourage long-term participation in decision-making by both shareholders and staff. Those that succeed will be better equipped to create wealth, solve complex problems, and compete in global markets. The role of the directorate and the need to ensure an effective framework for its accountability to owners is paramount to success. In line with this thinking, Mastering Global Corporate Governance argues that one of the key responsibilities of the Board is leadership, and that the root of good corporate governance lies in the strength of a corporate leader. In particular, it focuses on two 'burning issues' for senior executives: how can the boards of global companies best lead their companies through the fundamental dilemmas that face all boards?; and how can Boards, entrusted with ultimate responsibility for the way a company exercises leadership, provide that leadership?

Leseprobe

Table of Contents

Cover

Title

Copyright

Contributors

Preface and Acknowledgements

Introduction – A Roadmap for the Book

Part I: Global Corporate Governance – Issues, Framework and Evidence for Board Leadership Ulrich Steger

1: Now that Everything is in Place, Does it Matter?

2: How can Corporate Governance Fail?

Corporate governance and the Swissair grounding

Lessons from the Swissair case

Corporate governance and the Swissair grounding: an interview with Bill George

3: Shedding Some Light into the Black Box

Forces that shape corporate governance beyond legal frameworks

The result: Four distinct corporate governance clusters

Are these corporate governance models stable over time?

How involved are boards in practice?

4: Managing Complexity in Global Corporate Governance

Global corporate governance dynamics: the case of DaimlerChrysler (DC) 1

Lessons learned for global corporate governance

5: Some Nagging Questions

Part II: Three Burning Questions for Boards

6: The Role and Responsibilities of the CEO1

Introduction

Substantive strategic leadership issues for the CEO

Issues a CEO must deal with, as required by law

Professional management issues

Independence

Evolution

Conclusion

7: Performance Evaluation of Corporate Boards and Boards of Directors

Why evaluate a board?

How to evaluate whom?

Evaluation of individual board members

Concluding remarks

8: How Governing Family Businesses is Different

The nature of family ownership

Business governance in public companies

The stages of family business development

The evolution of family business governance

Types of owners and governance

The governance practices of mature family business

The special role of the family business board

The role of boards in conflict resolution

Board composition and director selection

Adapting governance practice in mature family businesses

Organizing the family and ownership

The value added by family governance

Summary

Part III: Learning from Past Experience

9: Cobra versus Commerzbank, War at the Helm of Elicore, and National Life

Cobra versus Commerzbank

Case study: War at the Helm of Elicore

Case study: National Life: Stay and fight or vote with your feet?

References

Notes

Index

Wiley End User License Agreement

List of Tables

3: Shedding Some Light into the Black Box

Table 3.1 Survey results: perceived and practised corporate governance

Table 3.2 Corporate governance approach versus system spread over systems

7: Performance Evaluation of Corporate Boards and Boards of Directors

Table 7.1 Observed evaluation practices

List of Illustrations

3: Shedding Some Light into the Black Box

Figure 3.1 The four determinants of corporate governance practice

Figure 3.2 Have you observed a shift in your corporate governance approach in the last 3–5 years?

Figure 3.3 Overall breakdown of board committees

Figure 3.4 Formal procedures and criteria

Figure 3.5 Time spent with members of the financial community, breakdown per region

Figure 3.6 Time spent with opinion leaders in comparison with the financial community, by region

Figure 3.7 External influences on board decisions

4: Managing Complexity in Global Corporate Governance

Figure 4.1 Timeline of the Daimler Chrysler merger

Figure 4.2 Daimler Chrysler’s Post-Merger Integration (PMI)

Figure 4.3 The five phases of DaimlerChrysler’s turnaround Source: Steger and Rädler (2003). Copyright © 2003 by IMD – International Institute for Management Development, Lausanne, Switzerland. All rights reserved. Not to be used or reproduced without written permission directly from IMD, Lausanne, Switzerland.

Figure 4.4 DaimlerChrysler’s corporate governance structure

Figure 4.5 The development of business and corporate governance structure at DaimlerChrysler, 1998–2002 Source: Steger and Rädler (2003).Copyright © 2003 by IMD–International Institute for Management Development, Lausanne, Switzerland. All rights reserved. Not to be used or reproduced without written permission directly from IMD, Lausanne, Switzerland.

6: The Role and Responsibilities of the CEO1

Figure 6.1 CEO’s power versus the board’s power

Figure 6.2 The CEO’s strategic paradigm

7: Performance Evaluation of Corporate Boards and Boards of Directors

Figure 7.1 Steps in the peer evaluation process

9: Cobra versus Commerzbank, War at the Helm of Elicore, and National Life

Figure 9.1 Organization of Elicore’s corporate governance structure.

Guide

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Table of Contents

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Mastering Global Corporate Governance

Ulrich Steger

Copyright © 2004 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England

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Library of Congress Cataloging-in-Publication Data

Mastering global corporate governance / editor Ulrich Steger ; contributing

authors Bill George … [et al.].

p. cm.

Includes bibliographical references.

ISBN 0-470-09041-3

1. Corporate governance. 2. International business

enterprises – Management. I. Steger, Ulrich. II. George, Bill (William W.)

HD2741.M33 2004

658′ .049 – dc22 2004000198

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 0-470-09041-3

Contributors

Bill George – Professor of Leadership and Governance, IMD Bill George is Professor of Leadership and Governance at IMD and also Visiting Professor of Management at Ecole Polytechnique Fédérale Lausanne (EPFL). He was Chairman of the Board of Medtronic, the world’s leading medical technology company, from 1996 to 2002 and Chief Executive Officer from 1991 to 2001, having joined Medtronic in 1989 as president.

He was named Director of the Year 2001–02 by the National Association of Corporate Directors and Executive of the Year 2001 by the Academy of Management. Mr George is a board member of Novartis and Target Corporations. He also serves as a director of American Red Cross, Harvard Business School, Carnegie Endowment, Allina Hospitals, Minneapolis Institute of Arts, and as Chair of Minnesota Thunder Pro Soccer.

He was an executive with Honeywell from 1978 to 1989 and Litton Industries from 1969 to 1978. From 1966 to 1969 he worked in the US Department of Defense. He received his BSIE with high honors from Georgia Tech in 1964 and his MBA with high distinction from Harvard

Business School in 1966. His book, Authentic Leadership, was published by Jossey-Bass in 2003.

Helga Krapf – PhD student, University of Berlin Helga Krapf is a researcher for the Global Corporate Governance Research Initiative. A doctoral student at the University of Berlin, she is writing her thesis on ‘The Context and Shaping Factors for Investor Relations in Global Companies’.

Peter Lorange – President and The Nestlé Professor, IMD Dr Peter Lorange has been the President of IMD since 1 July 1993. He is Professor of Strategy and holds the Nestlé Chair. He was formerly President of the Norwegian School of Management in Oslo. His areas of special interest are global strategic management, strategic planning and entrepreneurship for growth.

Dr Lorange has written or edited 13 books and some 90 articles. He has conducted extensive research on multinational management, strategic planning processes, and internally generated growth processes. He has taught at the undergraduate, Master and Doctoral levels, and worked extensively within his areas of expertise with US, European and Asian corporations, both in a consulting capacity and in executive education.

He serves on the board of directors of several corporations including: ISS – International Service Systems, Christiania Eiendomsselskap, S. Ugelstad Shipowners, StreamServe AB, Pharmasoft AB, Intentia International AB, and Preferred Global Health. He is also a board member of the Copenhagen Business School.

Franz-Friedrich Neubauer – Professor of Multinational Corporate Strategy and Planning at IMD

Dr F. Friedrich Neubauer, Professor of Multinational Corporate Strategy and Planning at IMD, is German; he joined IMI, Geneva, one of the parent organizations of IMD, in 1973.

Fred Neubauer is author of several books (and numerous articles). Portfolio Management, originally published in German (1990), now appears in English, Slovenian and Spanish. His present research interests are concentrated in the areas of corporate boards and European management approaches. In the area of corporate boards he – together with Dr Ada Demb – has been involved in a large empirical study on boards. The results of the study were published by Oxford University Press in March 1992 (Demb/Neubauer, The Corporate Board: Confronting the Paradoxes). His latest book – The Family Business: Its governance for sustainability (Macmillan, 1998) – was published together with Alden G. Lank. It is based on a four-year study of governance issues in family businesses.

Dr Neubauer is also a consultant in the area of strategic management and corporate governance. In the course of his career he has advised a broad range of companies, among them several large multinational car makers, soft drink and fragrance corporations, internationally active banks, packaging equipment manufacturers, building material producers etc. He also conducts in-company board retreats where the whole board of a given company looks at its own performance as a board.

Ulrich Steger – Alcan Professor of Environment, IMD Ulrich Steger holds the Alcan Chair of Environmental Management at IMD and is Director of IMD’s research project on Corporate Sustainability

Management, CSM. He is also Director of all DaimlerChrysler Partnership Programs, the Allianz Excellence Program and the Yukos Program. In addition, Professor Steger heads IMD’s Global Corporate Governance Research Initiative.

He is also a member of the supervisory and advisory boards of several major companies and organizations. He was a member of the managing board of Volkswagen, in charge of environment and traffic matters and, in particular, the implementation of an environmental strategy within the VW group worldwide.

Before becoming involved in management education, he was active in German politics. He was Minister of Economics and Technology in the State of Hesse with particular responsibility for transport, traffic, and energy. Before that, he was a member of the German Bundestag, specializing in energy, technology, industry, and foreign trade issues.

John Ward – Wild Group Professor of Family Business, IMD Professor Ward is The Wild Group Professor of Family Business at IMD, and also a professor at Northwestern University’s Kellogg Graduate School of Management (USA). He is director of IMD’s renowned ‘Leading the Family Business’ programme, in which he has taught since its inception in 1987. His teaching and research interests are in family enterprise continuity, governance, and sustainable strategy. His MBA and PhD degrees are from Stanford Graduate School of Business.

Ward has authored several books, including the bestselling Keeping the Family Business Healthy, Creating Effective Boards for Private Enterprises, and the just published Strategic Planning for the Family Business, as well as the Family Business Leadership Series (published in four languages) and numerous articles. He serves on the board of several companies in Europe and North America.

IMD IMD is one of the world’s leading business schools. Located in Lausanne, Switzerland, IMD has been helping organizations improve their performance for over fifty years. Its high standards are recognized by hundreds of the best companies around the world.

IMD was founded by a group of leading corporations to address the real challenges that international business executives face and, in the final analysis, need to win. To this day, IMD remains focused on real-world management issues – developing leadership capabilities and offering state-of-the-art concepts and tools. While other business schools primarily teach full-time graduate university students, IMD keeps an unwavering focus on the learning needs of executives and their organizations.

Executive Development from IMD

Executive Development from IMD provides cutting-edge thinking from the faculty of one of the world’s leading business schools.

Each book presents concepts and insights for today’s most important business and management challenges. The tone is straightforward. The message is practical. The ideas are tested and ready for managers to apply in their companies.

Each book follows a similar format: key-point summaries reinforce the message of each chapter and learning points translate concepts into action. Every chapter is illustrated with relevant international case studies that bring the discussions, analysis and recommendations to life.

Executives attend IMD programmes not only to learn but also to be inspired. The books in this series, like IMD programmes, provide executives with inspiration as well as with tools to improve themselves and make an immediate contribution to their companies. The focus is executive learning – engaging, energizing and impactful.

Preface and Acknowledgements

In times of massive public outcry, of the type we recently observed with regard to corporate governance, it is sometimes difficult to switch from a scandal-driven to a value added-oriented approach. Corporate failure always contains important lessons, if one focuses not on moral outrage and condemnation, but rather on digging out the lessons to be learned and transforming them into an idea of how to do things better. We began this research in autumn 2000 (the pre-Enron period) under the heading of the ‘Global Corporate Governance Research Initiative’ and tried not to become too distracted by the volatility of the political debate.

Our main research tool was a very personal, confidential, one-on-one discussion with board members across the world (62 at the last count), in addition to the many discussions I had with participants of IMD’s board programme and other programmes since 2000. Valuable input also came from the board retreats I run at IMD. To these retreats in particular I owe the insight into the relationship between corporate governance and strategy.

I know that this type of loose, unscripted, face-to-face discussion violates the rules of normal academic empirical research. But is there another way out? A chairman of a board rarely tells you why and how he had to kick out his CEO when a tape recorder is running. And I wanted to avoid the typical black box approach of academic research: take one input variable (e.g. independent directors) and measure output (e.g. financial performance), as this normally leads to inconclusive and impractical results. When one wants to shed some light into the black box, I see no other way out. My personal experience, both as a member of a managing board and numerous supervisory board assignments, certainly helped me to put unstructured information into context. But the reader should not only trust my fairness and accuracy in representing and aggregating the data – not least given my previous track record as an empirical researcher – but is also invited to test the fruitfulness of this research, especially in the two cases: War at the Helm of Elicore and National Life. These cases were written on the basis of discussions of the variety described above. They could probably have never been written as public cases.

So my thanks go to all the interviewees who devoted their time and brains to my pertinent and insistent questions, and to the participants of board retreats, who probably suffered as much from my German scepticism and punctuality as from my curiosity. But I hope that they too got something out of these discussions. Their contribution, as well as the input from various IMD participants, is especially appreciated at a time when corporate governance had become fashionable and I was most probably not the only one asking for their time.

The second source of information was the survey, where I have to praise Helga Krapf for her patience and diligence in pushing for a high response rate, and I hope that all her efforts in our research cooperation are now paying off with her PhD thesis on which she is currently working. (As this is under my supervision, I have to be careful with too much praise …)

While the academic literature and the many (too many?) articles in journals did not so much provide new insight, as help me to benchmark my own information and frame the hypothesis that I wanted to test. Additionally, it provided me with more details about governance systems that I was until then unfamiliar with.

This book could definitely not have been written without the support of IMD.

First, our President Peter Lorange, who not only participated as a researcher in IMD’s Global Corporate Governance Research Initiative (see Chapter 6: ‘The Role and Responsibilities of the CEO’), but is also responsible, together with Jim Ellert, John Walsh and their teams, for the creative research culture at IMD (including the necessary budgets). Fred Neubauer, now Professor Emeritus, pushed me to gain interest in this research beyond my personal experience and helped me to set up the research project, based on his tremendous experience and insights in this area (see his article on board evaluation). Bill George and John Ward were not only valuable contributors to this book (see the case commentary by Bill George and John Ward’s contribution ‘How Governing Family Businesses is Different’), but helped me to understand the US system better, so that we can live up to IMD’s commitment as a truly global research and learning platform. In addition

John made sure that our corporate governance research did not neglect the many other forms of incorporation aside from public quoted companies. The finance dimension of corporate governance was a useful correction to the temptation to look solely at structures of power.

In this book, authors are responsible for the content of their articles, but we made sure as a team effort that there is a ‘red thread’ (as outlined in the Introduction, which provides a roadmap of this book) and a common approach of ‘Real World, Real Learning’.

The collaboration was a great experience, partly because all authors shared the same curiosity and knack for relevance, but also because most of us have had personal experience as board members in different countries, industries and company sizes, making for an extremely rich experience. However, while IMD’s culture emphasizes teamwork, the final responsibility has to be taken by the person who spearheaded the effort. In this case it is I: a privilege that I definitely enjoyed, and a responsibility to which I hopefully live up to.

Introduction – A Roadmap for the Book

Many recent efforts of consultants and academics focus on the compliance part of corporate governance, i.e. how to keep the CEO out of jail. In contrast, our main assumption is that the major role of the board – as the company’s central lever – is about leadership: setting directions, providing value added, selecting the best people and coaching them, and walking the talk. In doing so, however, every board faces several dilemmas; the why, what and how are by no means obvious – not least because the shaping influences for corporate governance differ widely and there is no one-size-fits-all approach (which today is often the implicit assumption of regulation and codes of conduct).

In Part I, ‘Global Corporate Governance – Issues, Framework and Evidence for Board Leadership’, Ulrich Steger introduces the basic framework and its results to shed some light into the ‘black box’ of corporate governance. It starts out with a critical review of the current debate to then focus, using the Swissair case as a template, on the four dilemmas the board is confronted with (often in varying, but never in irrelevant degrees): micro-management versus detachment (the division of labour and cooperation between management and board), risk taking versus financial control (the system and processes to set directions and monitor results), the eroding boundaries in global companies versus national frameworks and the conflicting expectations of stakeholders for the licence to operate.

Second, shaping factors of corporate governance – personalities, capital markets/owners, strategy and cultural/legal influences – lead to a broad variety of corporate governance systems. These are clustered into four types: CEO-dominated, checks-and-balances, owner-centred and consensus-oriented. The basic mechanisms and how they function are explained. It is argued that each of them works and is a national response to the context and needs to be met by corporate governance.

Third, the specifics of corporate governance in global companies are outlined, using DaimlerChrysler as a template. The DaimlerChrysler case is analysed to offer lessons on how such complexity can be managed.

The second part of the book deepens the analysis of three ‘burning questions’, touched on in Part I. Peter Lorange (‘The Role and Responsibilities of the CEO’) discusses in detail the relationship between the CEO and boards. Especially now that boards are more ‘empowered’ and stronger, each party has a responsibility to make this relationship work and complement one another in the best interest of the company.

Fred Neubauer and Helga Krapf report on framework and experiences with the evaluation of CEOs and boards. In addition to being a hot topic, evaluation is a long-standing practice in best practice boards.

In corporate governance, family business differs most from public companies (which does not mean that they cannot learn from one another). John Ward discusses these differences, specifically with regard to the different phases of the life cycle of a family business. He reviews the different roles that should be played by boards and the family in a transparent way.

In Part III, Bill George discusses three case studies, as well as providing his interpretation of the Swissair case. The first case deals with conflict in boards, focusing on the role and responsibility of the independent director. Conflict between the chairman of the board and the CEO is explored in the second case. The third case raises corporate governance issues and the stewardship responsibility of management in case of a raider attack. All three cases, plus the Swissair and DaimlerChrysler cases, were recent outputs of IMD’s Global Corporate Governance Research Initiative, as was the survey that provided empirical evidence for the first part of this book.

Each of the chapters is easy to read (at least that was our intention). In addition to raising relevant issues, they also provide proven solutions to problems and ways to professionally manage the dilemmas that arise. At IMD, we meet rigorous global academic standards in our research, but we care equally about practical relevance. While the primary target group of this book are board members, company secretaries and other corporate officers, the academic world might benefit from our research, as well as the evidence and cases presented. After all, few academic institutions enjoy such a close working relationship and easy access to its research subject as IMD.

You are invited to provide your feedback on how well we measured up to our intentions by sending an email to Ulrich Steger at [email protected].

Part IGlobal Corporate Governance – Issues, Framework and Evidence for Board Leadership

Ulrich Steger

1Now that Everything is in Place, Does it Matter?

It’s a familiar pattern: a scandal erupts followed by a public outcry, and leads to a political push for new regulation – and rueful sinners search their souls and promise to better themselves.

Rarely has this pattern worked as perfectly as in the corporate governance ‘reforms’ of 2002. Barely known to a broader management audience, let alone the public, corporate governance rocketed to the top of the political agenda. It will take lawyers and courts years to sort out the practical relevance of the new regulation, especially in the USA, propelled through Congress by the urgent need to ‘restore investors’ confidence’ (a noble translation for the hope to drive share prices to previous heights).

Remorseful top executives gather in blue-ribbon panels, creating ‘codes of conduct’, best-practice recommendations, guidelines, handbooks, etc., with a rabbit-like growth rate. Consultants and academics have not been able to resist the temptation to jump on the bandwagon: boards are probably now one of the best surveyed and researched economic institutions ever (we plead guilty here, too). And ethical advice is being dispensed by the score.

Whether mired in scandal or not, in today’s interconnected world, all countries move on corporate governance in the same direction (only the ‘rouge states’ and notoriously corrupt countries miss out). Greece, for example, used the opportunity to try to shed its emergent market image. South Africa combined its corporate governance efforts with black empowerment. In the European Union, the commission made yet another important announcement. The list could continue nearly indefinitely. The reaction was quickest in the USA, because the most dramatic collapses happened there and created probably the provisions with the maximum bureaucratization of corporate governance. In Asia and especially Japan the response was slow, as always, but will continue (probably even when the US again switches course).

Everything is now in place: independent directors, committees of all sorts, CEOs and CFOs who are now held accountable for the figures they release (weren’t they before?), auditors who should by now be watchdogs rather than lapdogs, and companies around the globe will report to which code of conduct they adhere.

Will it help placate angry shareholders and a concerned public beyond having a placebo effect? Maybe up to a point, but there are three items of bad news.

The first is that there is no evidence that any of the corporate governance structures, such as stipulations concerning the proportion of independent directors, equity ownership of management or any of the other remedies recommended (e.g. eliminate the former CEO from the board), have had any detectable impact on board performance. A revealing example is General Electric, undoubtedly one of the most successful US corporations, which in past decades had a fairly poor corporate governance structure, in light of today’s standards (see Box 1.1: GE’s corporate governance reforms).

Box 1.1: GE’s corporate governance reforms

The corporate governance standards of General Electric (GE) under its most admired management hero, Jack Welch, are best illustrated by considering the changes his successor, Jeff Immelt, pushed through (mostly in early 2003) after GE lost approximately 50% of its market capitalization. These changes were the following:

Strict implementation of the Sarbanes-Oxley Act

1

(e.g. Audit and Compensation Committee)

Two-thirds of GE’s directors should be independent (under a strict definition of independence

2

)

A lead director, who advises on the committee chairs and the board agenda

Three ‘executive sessions’ (of independent board members) per year

A ‘strategy retreat’

Every director should visit GE’s businesses on a yearly basis, thus interacting directly with operational management

A self-evaluation process for the GE board

Increased responsibility for the audit committee, as well as greater financial disclosure of GE, especially its many and complex SPEs (Special Purpose Entities)

More variable compensation, and under stricter conditions, for management and board members.

Equally important may be more on the symbolic side: GE’s century-old, forbidding, dark wood-panelled boardroom was replaced by an airy meeting room with daylight.

(For details see GE’s website: www.ge.com/en/commitment/governance/highlights.htm)