• Extraordinary Board Leadership: the Seven Keys to High Impact Governance, and
• The Strategic Board: the Step-by-Step Guide to High Impact Governance;
• Handbook of International Corporate Governance

Governance background

The ‘greed is good’ governance philosophy of the 1980s and 1990s seemed to give way, at the end of the 20th Century, to a ‘looting is good’ approach. Catastrophic financial failure is a characteristic of the business cycle. Looting has happened before. Corporate collapse, originating in a failure of internal control, has happened before. The spate of collapses and financial failures at the end of the Internet bubble, though, indicated a systemic governance weakness, and one whose increasingly worldwide implications have a significant, negative knock-on effect on already problematic pension funds and pensioner assets. Enron, Worldcom, Marconi, Parmalat and many other corporate disasters are the storm damage of unbridled executive authority; shareholders are no longer enthusiastic about losses on this scale.

Governments, already grappling with the challenge of funding the pensions of an inexorably graying population bulge, cannot afford further wanton asset destruction and have started applying themselves to rooting out corporate governance misbehavior. They are doing this through a combination of overt regulatory action and slightly more covert pressure on institutional investors to stand up for their rights as shareholders and more determinedly exercise their de facto responsibility to insist on proper governance from those organizations in which they are invested.

The Concept

The concept of governance is a simple one, defined in the 1999 OECD Principles of Corporate Governance as: 'the system by which business corporations are directed and controlled.’ The ‘holy trinity’ of good corporate governance has long been seen as shareholder rights, transparency and board accountability. While corporate governance is overtly concerned with board structure, executive compensation and shareholder reporting, the underlying assumption is that it is the board that is responsible for managing the business and controlling the risks to its assets and trading future. IT Governance has emerged, in today's information technology business environment, as a central support for effective corporate governance.

The modern corporate governance movement arguably started with the Cadbury and Greenbury reports in the UK in the 1990s. They were merged into the Combined Code in December 1998 and, in 1999, the Turnbull Report provided directors with additional guidance on how to tackle internal control. The UK's Combined Code on Corporate Governance is now the bedrock of UK corporate governance.

The OECD

The OECD Principles of Corporate Governance were also published in 1999 (and substantially revised in 2004), but it wasn’t until after the Enron and WorldCom debacles, and the US Sarbanes Oxley response in 2002, that most other OECD countries made a determined effort to adopt codes of corporate governance. With the exception of the US, individual OECD countries have all adopted corporate governance codes that work on the ‘comply or explain’ principle. The US Sarbanes Oxley act (‘SOX’) works on the basis of ‘comply or be punished.’ One of the impacts of SOX is that companies that are directly affected by it are requiring their partners and suppliers to certify conformance to SOX because that gives them greater certainty of ongoing compliance themselves.

And that’s the way the OECD is beginning to move. Eliot Spitzer, the New York Attorney General, expressed a not uncommon view when he said: ‘the honour code amongst CEOs didn’t work. Board oversight didn’t work. Self-regulation was a complete failure.’ Executives are fighting back, but the most recent UK legislation (the 2004 Companies Act) and the current revision to the European Union’s 8th Directive on company law point to greater compulsion – from governments, regulators and justice departments - in governance requirements becoming the norm across the OECD.

The requirement for all organizations to adopt best corporate governance practices, irrespective of their nationality or location, is – in spite of the resistance of many executives in many jurisdictions – growing stronger. The ‘entry price’ for access to western capital markets is, increasingly, acceptance of western accounting and corporate governance norms.

Internationally

A number of countries within the OECD already have well-developed corporate governance regimes. The corporate governance codes of most of the OECD countries are available through the ECGI website. Corporate governance is also of growing importance in Asia.

A Growing Area of Concern

An increasingly relevant subject requiring consideration within the sphere of Corporate Governance is the issue of Green IT. No longer can the executive board and policy makers of an organisation ignore the relevance of Environmental Awareness within the framework of decision making.

Here you can find further information on Green IT and a selection of cutting edge texts, support manuals, and standards on both Green IT and the Environmental Management Standard ISO 14000.

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