Lecture at the Graduate School of Business – UCT
Governance – a practical perspective
4 November 2010
Maria Ramos
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The Origins of governance
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The word “governance “derives from the Greek verb κυβερνάω [kubernáo] which
means to steer .
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The World Bank defines governance as “the exercise of political authority and the use
of institutional resources to manage society's problems and affairs.”
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Corporate Governance is the system by which companies are directed and
controlled…” Cadbury Report (UK), 1992
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“Corporate governance involves a set of relationships between a company’s
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.” Preamble to the OECD
Principles of Corporate Governance, 2004
The ability of an organisation to regulate itself and manage its risks for
the benefit of its various stakeholders.
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A modern philosophy of corporate governance
• A modern philosophy of corporate governance
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Self - regulation
Risk management
Adequate controls
Input from others
Escalation of issues
Reporting of outcomes
Substance over form
Mechanism for the application of common sense, honesty and integrity.
A modern philosophy of corporate governance cont …
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The philosophy is elegantly captured in King III
– Leadership
– Sustainability
– Corporate citizenship
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It is however the build-up to reporting that is the more important
aspect to governance
reporting
decision-making
Identifying
issues
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The Prevailing Regulatory Environment
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Regulatory environment – industry specific (Banks Act, Pension
Fund Act, Occupational Health and Safety legislation, etc)
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Multi-jurisdictional legislation
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Local legislation (Companies Act, Consumer Protection)
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King III
The golden thread :
Long-term sustainability of the global financial and economic system
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King III – a focus on integrated reporting
Ethical Leadership and Corporate Citizenship
IT governance
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Good corporate governance is essentially about effective
leadership
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Ensure IT is on the agenda
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Have a IT Charter and IT policies
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Responsible leaders build sustainable business
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IT internal control framework
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Responsible leaders reflect the role of business in society
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Independent assurance on effectiveness of IT controls
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Responsible leaders do business ethically
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Align IT to performance and sustainability objectives
Stakeholders
Integrated reporting
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Appreciate that stakeholder perceptions effect
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Business Sustainability more broadly defined
reputation/ need to manage this risk
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How what we do today will keep us in business
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Identify important stakeholders
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No more ivory tower – integrated and organic
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Delegate responsibility to management to deal with
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Business / society / planet
stakeholder relationships
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Engrained in our DNA
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Mechanisms and processes for constructive
engagement of stake holders
Business / society / planet
What is good for one is good for the others
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From Theory to Practice
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The basic building blocks
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Most large organisations have the features of governance
– Board Charter, Sub-Committee terms of reference, Organograms,Frameworks,
and Handbooks
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Leadership will impact how these features become living and breathing
documents and processes
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High dependence on the quality of leadership and their ability to align their
values with those of the organisation
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Translation into methodologies, processes, behaviour and accountability.
Quality of leadership and values
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A “licence” to do business
• The nature of a bank
− Maintaining public trust
− Taking of deposits
− Safeguarding assets : custodial
− Physical and electronic transfer of monies
− Underpins the social fabric of our communities
− Provider of employment and supporter of communities
− Various stakeholders (customer, people, shareholder, community, government
and regulators)
Disciplined execution is the enabler: 24 : 7 : 365
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Setting objectives and monitoring them
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Setting standards vs. monitoring them
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Practical and logistical implications
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Defined governance structures to support the board mandate.
− Exco,
− Exco sub-committees, and
− other Risk governance and control committees, for every large
business; and for the Group as a whole
Governance : across the length and breadth of the organisation
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The Role of Governance and Control Committees
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Move from back–office function to an end-to-end practice with
executive oversight
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Introduction of the principle of independent members
− understand the business being discussed
− actively participate
− challenge the status quo
− identify key risks before they materialise
It is the notion of independent non-executives ; applied to executives
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Traction
Governance is gaining traction
• Global economy
• Globalisation
• Regulatory reforms
• Consistency and predictability across regions
Governance = Self Regulation + Risk Management
for all stakeholders
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