governance jos luhukay, phd national committee on governance national information &...
TRANSCRIPT
Governance
Jos Luhukay, PhDNational Committee on Governance
National Information & Communications Technology Council17 January 2007
Balancing Economic Integrity& Social Governance: A Corporate View
2
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
3
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
4
The Company Value Iceberg
Market Capitalization
Intangibles(Intellectual Capital, other Nonfinancials,
Stakeholder Relationships, etc)
Tangibles(a.o Financial Capital,
Balance Sheet)
5
The Company Value Iceberg (1991)
17%
83%
Market Capitalization
Intangibles / Nonfinancials
Tangibles / Financials
Arthur D. Little, The Business Case for Corporate Citizenship , 2002)
6
The Company Value Iceberg (1998)
71%
29%
Market Capitalization
Intangibles / Nonfinancials / Stakeholder Relationships
Tangibles / Financials
Arthur D. Little, The Business Case for Corporate Citizenship , 2002)
7
The Business Case
Market Capitalization
Intangibles / Nonfinancials
Tangibles / Financials
Regulators
Customers
The Media
Suppliers
Unions
Community
NGOs
Investors
Employees
Biosphere
Competitors Developers
8
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
9
A (Simplified) Business Model
Customers
Provides Benefits(Goods and Services)
ProvidesFunds
Leaders
Provides Plans
Auditors
Feedbackon Costs
Feedbackon Benefits
Feedbackon Value
Owners
Regulator/Government
Provides Influence
Provides Influence
CommunityInterest
Provides Influence
Provides Influence
Provides Resources
Provides Wealth
Suppliers/Unions
Provides Purchased
Goods and Services
Provides Influence
CORPORATION
10
A Tsunami of Business Risks
Market Forces (10) Business Risks (5)
Mega-Issues (5) Demanding Stakeholders (5)
Climate Change Awakened Customers
Market Risk
Balance Sheet Risk
Operating Risks
Capital Cost Risks
Sustainability Risks
+ Difficult access to capital
Pollution & Health Activist Shareholders
Globalization Backlash
Civil Society / NGOs
Energy Crunch Government Regulators
Erosion of Trust Financial Sectors
11
Negative Impact of the Market Forces
10 Market Forces
5 Mega-Issues 5 Demanding Stakeholders
Climate Change Green Consumers
Pollution & Health Activist Shareholders
Globalization Backlash Civil Society / NGOs
Energy
Crunch
Government Regulators
Erosion of Trust Financial Sectors
Sea ChangeOf
RisingExpectations
12
… and a Sea of Opportunities
10 Market Forces
5 Mega-Issues 5 Demanding Stakeholders
Climate Change Green Consumers
Pollution & Health Activist Shareholders
Globalization Backlash Civil Society / NGOs
Energy
Crunch
Government Regulators
Erosion of Trust Financial Sectors
Innovation
ProductivityGrowth
Brand
Image
CompetitiveAdvantage
$aving$Revenue
13
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
14
Corporate Priorities
Productivity Brand Image
Profit
Growth
Attracting & Retaining Top Talent
Managing Risks Innovation
Speed to Market
Leadership
Market Share
Staff Motivation
Share Price
CompetitiveAdvantage
Governance
Expense Savings
New MarketsComplying withNew Regulations
Attracting & Retaining Customers
Responding to Emerging Market Forces
Revenue
15
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
16
5 Stages in Corporate Maturity
5. Purpose / Passion
-------------------------------
4. Integrated Strategy
3. Beyond Compliance
2. Compliance
1. Pre-Compliance
• Regulatory Threat• PR Crisis
• Passionate Founder / CEO
• Regulatory Pressure / Enforcement
P r o
a c
t I v
e
Rea
ctiv
e
• Business Opportunities – “Carrots” • Risk Management – “Sticks”
17
Extreme Mental Models
Extreme Business View
ExtremeIntegrated
View
Environment
ECONOMYSociety ENVIRONMENT
Society
Economy
18
Potential Benefits
1. Reduced electricity, fuel, and waste costs
2. Reduced recruiting costs
3. Reduced attrition costs
4. Increased employee productivity
5. Increased revenue / market share
6. Reduced risk, easier financing
Usual
focus
19
The Corporate Value Iceberg
Balancing Risk-Taking and Revenue Generation
Corporate Priority Setting
Balancing Business Pursuits and Social Governance
Conclusion
Topics
20
Implementing the Concept
1. Show senior leadershipInclude sustainable development in vision, mission & strategies
Avoid “green-washing”, “me too” hype
Visibly support sustainable development: speeches, questions, actions
2. Educate the whole companyVisibly sponsor and support the sessions
3. Establish a “Corporate Governance Committee” as part of the Board of Commissioners
Led by a senior commissioner
Reinforces that it is business strategy vs. compliance or philanthropy issue
21
Quasi Single-Board StructureQuasi Single-Board Structure
ExecutiveManagement
Corporate GovernanceCommittee
RiskMitigationCommittee
AuditCommittee
Commissioners
Governance
Thank You
Balancing Economic Integrity& Social Governance: A Corporate View