1. Governance as Part of Managerial Leadership
EXLD 540
© 2010, Jens Mueller

2. Case Study 1 – Corporate Governance in Singapore
Page 201
NTUC Fair Price Cooperative

9. Governance as Part of Managerial Leadership
Cambodia Mekong University
© 2013, Jens Mueller

10. Friedman – The Duty
The individual must serve a more general social interest–whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not. Unfortunately, unanimity is not always feasible.
© Jens Mueller

11. Mueller – The Commitment
Main driver for joining a board in NZ is “wanting to do good”
Most independent directors have poor governance skills but good executive knowledge
Independent directors serve with more than a legal obligation – they want to make a difference

12. Hints for your group work:
Assess an organization within your group:
Stakeholder focused?
Clear separation of duties?
Strong governance in theory and practice?
Engagement and participation of all in corporate governance?
Whistleblower pathways?
Effective board based on quality input by independent contributors?

13. Board Purpose
“The definition of a board is an organized group of people with the authority collectively to control and foster an institution that is usually administered by a qualified executive and staff.”
Cyril O. Houle
Governing Boards: A Publication of the National Center for Nonprofit Boards

14. Board Functions

15. Legal Duties Public accountability Filing and reporting duties
No harm to creditors
No violations by company management
Possibly duties against the shareholder interests
Personal unlimited liabilities

16. Governance and Conflicts
Conflicts prior to joining the board
Conflicts emerging while on the board
Understanding fiduciary duties
Perceptions of conflicts
Creating and maintaining a standard of conflict-free governance

17. Ethical Board Guidance
Conflicts prior to joining the board
Conflicts emerging while on the board
Understanding fiduciary duties
Perceptions of conflicts
Creating and maintaining a standard of conflict-free governance

18. Auditing and Financial Planning
Being able to understand financial statement
If you understand ratios, you are fine
What information should the Board receive?
How is that information prepared?
What are the warning signals?
Are there regulatory delays?

19. Documentation and Operation of Board meetings
The role of chairs and directors
When and how often and how does the board meet?
Agenda and Minutes
The cloak-and-dagger meetings outside of the scheduled meetings

20. Leadership Do board members have to be old?
Board members from outside the industry
Directors who complement skills rather than overlap skills
The board as a group of respected friends

21. Separation of Governance and Management
The creeping involvement of directors in operational decision-making
How should executives participate in/for board meetings?
What if the board members have ‘been there, done that’ and know the operational side well?

22. Board Compensation Low pay for directors
Alignment of benefits from the top down
Where are the non-cash benefits?
What is a director worth?

23. Board Review
Regular self-evaluations with or without an external facilitator
Opportunities for directors to comment on each others’ performance and contribution
Board reporting to shareholders and stakeholders about its own development and upskilling

24. Board Recruitment It’s who we know It’s who can predict
It’s who fits in
It’s who says yes a lot
It’s who is close
It’s who looks good
It’s who impresses others

25. “Pick a Leader” Candidate 1 Associates with crooked politicians
Consults with astrologers
Two mistresses
Chain smokes
Drinks up to 10 Martinis per day

26. “Pick a Leader” Candidate 2 Ejected from office twice
Sleeps until noon
Smoked Opium in college
Drinks large quantities of whiskey every evening

27. “Pick a Leader” Candidate 3 Decorated war hero Vegetarian Non smoker
Drinks an occasional beer
No extra-marital affairs

28. Where is Diversity Needed?
The recognition that diversity among directors is important, varies significantly throughout New Zealand.
The largest number of firms which valued diversity highly came from diversity in Christchurch and Dunedin,
In contrast Auckland and Hamilton trailed the rest of New Zealand.
Gender and Professional skills are less important than Track Record, Work Experience, Global Experience and Age

29. Governance Failures How do failures make themselves known?
Can directors be ignorant of issues?
What structures are needed to flow information freely to the Board?
How are failures communicated effectively?

30. Boards in Small/Family-Controlled Firms

32. Boards in Non-Profits

33. Boards in Non-Profits Highly committed ideologists
Very knowledgeable about the purpose and vision
Large and welcoming
Well networked and easily accessible
Often deeply involved in the operation

34. Boards in Non-Profits, ctd.
Third Sector Uniqueness
Lack of transferable managerial skill
Lack of scalable knowledge
Mistrust towards any non-sector entity/person
Oblique disclosure
Competitive with all other non-profits
Rarely well managed and transparent
Poor accountability standards

35. Are NPOs automatically more ethical/socially responsible?
Fund raising
Staff/volunteer recruitment
Reporting to funders
Accountability to stakeholders
Internal performance assessment
© Jens Mueller

36. “But Dad: Everyone’s Doing It”
Rationalizing unethical behavior
Pressure to go along with peers
“The way we do things around here”
Solution:
If there are rules, they apply to all, and they are enforced at peril of pain
If there no rules, new ones are made through consultation

37. Ethics as an Organizational Culture
Cookie Cutter templates do not work
Strong cultures can handle hard choices
Leaders create culture

38. From Mind to Gut Get the facts Tightly define the issue
Who are the affected stakeholders
What are the obligations/duties
What are the consequences
How do your character/integrity relate
What are the action choices
Check your Gut