An Introduction to Corporate Goverence

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Business-Finance

Published on December 19, 2008

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An Introduction to Corporate Governance & Enterprise Information Systems : An Introduction to Corporate Governance & Enterprise Information Systems Corporate Governance & EIS : Corporate Governance & EIS Presentation Developed by: Casey G. Cegielski, Ph.D., CISA, CISSP Associate Professor of Information Systems Management and KPMG LLP Advisory Faculty Fellow Department of Management, College of Business, Auburn University, Auburn, AL 15 years of professional experience related to corporate goverenece and information systems management in public accounting, healthcare, financial services Active research in decision modeling for corporate goverence of information technology Corporate Governance & EIS : Corporate Governance & EIS Presented by: Carl M. Rebman, Jr. Ph.D., Undergraduate degrees in Art & Business from the University of Arizona Master of Business Administration from the University of Mississippi Doctoral degree in MIS and Minor in Telecommunications and Marketing Professional experience in the banking, hospitality management, and funeral industries. Currently at the University of San Diego—ran a master program in addition to running the Information Technology Management Institute Worked on research projects with the Memphis Redbirds, NASCAR, and the NFL Published over13 journal articles and 35 conference proceedings The Concept of Governance : The Concept of Governance What is “Governance?” Take out a sheet of paper and for the next 10 minutes think about and describe your idea of what is meant by the term “governance.” The Concept of Governance : The Concept of Governance The term "governance" is a very versatile one that implies action. It is used in connection with several contemporary social sciences (i.e. economics, political science). It originates from the need of economics (as regards corporate governance) and political science (as regards State governance) for an all-embracing concept capable of conveying diverse meanings not covered by the traditional term "government“ which referees to an entity and not an activity The Concept of Governance : The Concept of Governance The need for governance exists anytime a group of people come together to accomplish an end. Look back at your initial description – how many people stated that governance involved a group of people? (give yourself 10 points if you did!) How many of you said it involved a shared vision? (give yourself 10 points if you did!) Most agree that the central component of governance is decision-making. The Concept of Governance : The Concept of Governance It is the process through which a group of people make decisions that direct their collective efforts. How many of you said governance was a process? (give yourself 20 points if you did!) How many of you said governance was about decision making? (20 more points if you did!) How many said governance was a collective effort? (20 more points!) Decisions Making The Concept of Governance : The Concept of Governance As is the case with any group of people, there are multiple actors with individual aspirations and as well as common agendas for the organization's – these people are know as stakeholders How many said governance involved people with individual AND common agendas or vest interests ? (10 more points) Stakeholders The Concept of Governance : The Concept of Governance Stakeholders articulate their interests, influence how decisions are made, and must also be accountable for the outcomes of decisions. How many stated something about accountability of outcomes? (10 more points) Decisions Making Stakeholders Input Accountability The Concept of Governance : The Concept of Governance Add up your score – how did everyone do? Most of you probable scored 100 right! If you did not, don’t worry, by the end of the course you a governance guru! The Concept of Governance : The Concept of Governance The relationship of organization governance The Concept of Governance : The Concept of Governance Work - Performing the tasks required to fulfill the mission Governance - As defined above: the interface with stakeholders, the source of strategic decisions that shape the organization and its work, and ultimate accountability for the work and actions of the organization Management - The link between governance and work. The organization of tasks, people, relationships and technology to get the job done The Concept of Governance : The Concept of Governance In theory the divisions between these roles are clear. In practice the divisions become blurred, disappear altogether or, more dangerously, become confused. For example, in the non-profit entity, the primary charge of boards is the governance role but their responsibilities might often cross over into the management and work roles of the organization. As a note, senior management is almost always heavily involved in the governance role. The real danger is not the mixing of these roles, but unclear definition of responsibilities and lost lines of accountability. The Concept of Governance : The Concept of Governance What is “good governance?” Think about and describe your idea of “good governance.” write your answer on a piece if paper and we’ll discuss it in 10 minutes. The Concept of Governance : The Concept of Governance What is “good governance?” One goal of “good governance” is to enable an organization to do its work and fulfill its mission. So…. Good governance results in organizational effectiveness. How many said good governance is about “enabling the organization” to reach its vision? (give yourself 50 points!) The Concept of Governance : The Concept of Governance What about efficiency? Today, good governance addresses effectiveness first and secondarily efficiency. Why? Effectiveness is an absolute term. Efficiency is a managerial metric that is a relative term. The Concept of Governance : The Concept of Governance Examples Effectiveness – Was the organizational goal/objective as it relates to the company vision and mission actually achieved or not? Yes or No! The Concept of Governance : The Concept of Governance Examples Efficiency – How well did we achieve the organization goal (i.e. did we do it in cost-effective fashion?) Assumes we are already effective! The Concept of Governance : The Concept of Governance Today good governance is about both achieving desired results (effective) and achieving them in the right way. The “right way" is largely shaped by the cultural norms and values of the organization, there can be no universal template for good governance. How many said good governance is about “doing the right thing?” (give yourself 25 points!) The Concept of Governance : The Concept of Governance Each organization must tailor its own definition of good governance to suit its needs and values. That does not mean that all governance is relative to the people who shape the organizational culture. How many said good governance is based on values? (give yourself 25 points!) How did you score on “good governance” – show of hands – 75 and above? The Concept of Governance : The Concept of Governance There are some universal norms and values that apply across cultural boundaries. The United Nations published a list of characteristics of good governance. One more time, take out a piece and list some of the items that you think are “universal norms or values” of good governance. The Concept of Governance : The Concept of Governance Here’s the UN list: Participation: providing all men and women with a voice in decision-making Transparency: built on the free flow of information Responsiveness: of institutions and processes to stakeholders Consensus orientation: differing interests are mediated to reach a broad consensus on what is in the general interest The Concept of Governance : The Concept of Governance Equity: all men and women have opportunities to become involved Effectiveness and efficiency: processes and institutions produce results that meet needs while making the best use of resources Accountability: of decision-makers to stakeholders The Concept of Governance : The Concept of Governance Strategic vision: leaders and the public have a broad and long-term perspective on good governance and human development, along with a sense of what is needed for such development. There is also an understanding of the historical, cultural and social complexities in which that perspective is grounded. The Concept of Governance : The Concept of Governance Why examine governance? Or more importantly, what are the benefits, if any, of good governance? The Concept of Governance : The Concept of Governance Good governance leads to a number of positive consequences, including: People trust your organization You know where you’re going Your board is connected to your membership and stakeholders You get good decisions; people value your work You have the ability to weather crises Financial stability The Concept of Governance : The Concept of Governance Overwhelmingly, in today’s private sector, governance is the collective responsibility of various corporate boards and committees (i.e. Board of Directors, Audit Committees, ect). The Concept of Governance : The Concept of Governance Regardless of the specific nature of a board or committee, they all share a common responsibility… All boards/committees share a fundamental stewardship role which includes the inescapable basic responsibility to promote the health and well-being of their organizations. The Concept of Governance : The Concept of Governance Beyond the universally shared responsibility for the well-being of the organization there are a number of specific responsibilities that governance boards typically accept. I’ll discuss them in three broad categories For the next 10 minutes, on your piece of paper, list and describe some of the roles that you think are appropriate for governance boards. The Concept of Governance : The Concept of Governance 1. Representation Represent the stakeholders Carry the public trust Facilitate board rejuvenation — organize the selection of new directors The Concept of Governance : The Concept of Governance 2. Decision-making and leadership Establish or affirm mission: Development and/or custodianship of the organizational purpose, mandate and identity Strategic Direction: Provide vision for the future; Develop and implement the long-term plan; Set or approve the general direction and financing of the organization; Ensure that the organizational mission remains responsive to changes in the environmental context and organizational realities; The Concept of Governance : The Concept of Governance 2. Decision-making and leadership (cont) provide an accountability structure to management; direct and advise management; select, support, evaluate and, if necessary, terminate the senior manager Financial Stewardship: Trusteeship of financial resources to ensure that funds are expended for the purposes intended The Concept of Governance : The Concept of Governance 2. Decision-making and leadership (cont) Human Resources Stewardship: Framework of HR policies Risk management Managing transitional phases and critical events: act as organizational safety net Represent organization to the community The Concept of Governance : The Concept of Governance 3. Accountability Ensure transparency of the process Monitor and evaluate performance Responsibility and reporting to stakeholders Act as the ultimate source of accountability under the law for the performance and actions of the organization The Concept of Governance : The Concept of Governance Did you get all three areas of responsibility? How many items off my list did you have on your list? The Concept of Governance : The Concept of Governance Assignment #1 For then next hour, think about the organization for which you work (or have worked) and use your understanding of the concept of corporate governance to describe the workings of the process as you know them in said organization. 5 +/- pages of narrative is sufficient and be prepared to present your narrative to the group in a 5-7 minute presentation. The Concept of Governance : The Concept of Governance Items to include/consider: The composition of the organization and existence and composition of boards (executive level, management, staff) Active or passive presence/visibility Communication process And other items that define the characteristics and role of the governing body and its process of governance in the organization.

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