Private Sector Opinion
37 items available
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The Private Sector Opinion series is produced by the Global Corporate Governance Forum. The Forum’s mandate is to promote the private sector as an engine of growth, reduce the vulnerability of developing and emerging markets to financial crisis, and provide incentives for corporations to invest and perform efficiently in a transparent, sustainable, and socially responsible manner. In doing so, the Forum partners with international, regional, and local institutions, drawing on its network of global private sector leaders.
Items in this collection
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Publication
Governance for SME Sustainability and Growth
(International Finance Corporation, Washington, DC, 2019)As small and medium enterprises (SMEs) evolve from start-up to maturity, they need to grow into governance. This paper introduces the International Finance Corporation (IFC) governance methodology for SMEs, a governance model designed to support the organic growth of small and mid-size businesses by offering solutions that are fit for purpose through each stage of their evolution. -
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The State of Governance at State-owned Enterprises
(International Finance Corporation, Washington, DC, 2018)Commercial enterprises that are owned and controlled by governments continue to constitute a significant portion of business activity in many parts of the world. This paper examines three critical areas for strengthening the quality of governance of state-owned firms professionalizing government ownership, strengthening commercial orientation, and developing stronger, more independent boards and the challenges involved in implementing reforms. -
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Women in Business Leadership Boost ESG Performance: Existing Body of Evidence Makes Compelling Case
(International Finance Corporation, Washington, DC, 2018)This paper explores the existing body of research linking a higher proportion of women in business leadership—including on boards of directors and in senior management—to improve overall company performance. The authors conducted a comprehensive literature review to uncover substantial evidence connecting increased gender diversity at the top with enhanced environmental, social, and governance standards. They identified equally strong evidence connecting better ESG with stronger corporate performance, building a comprehensive business case for the value of women’s participation on boards and in senior management. -
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Stress Testing Corporate Governance
(International Finance Corporation, Washington, DC, 2018)This compendium looks at the development of corporate governance since the financial crisis and asks whether governance rules and practices have developed in a way that positions companies better to address systemic risk. The occurrence of spectacular corporate scandals since the crisis—Tesco, Toshiba, VW, and Wells Fargo, and the many institutions affected by the LIBOR scandal—suggests that the governance lessons have not been learned, certainly not universally. So we ask,What more needs to be done? How can investors, regulators, and the concerned publics beassured that the board of directors is, in fact, practicing good corporate governance? This compendium look at stress-testing governance from several angles: systemic risk in the financial system, risk at the individual corporate level, and the differentiated challenge as exists between companies with dispersed ownership, family ownership, controlling shareholders, and state ownership. -
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Responsible Boards: Action Plan for a Sustainable Future
(International Finance Corporation, Washington, DC, 2015-02)As external pressures - including resource scarcity, globalization, and access to information - continue to increase, the way corporations respond to sustainability challenges will determine their long-term viability and competitiveness. In this paper, the author traces the development of a corporation s attitude toward sustainability from its being an add - on that is nice to have and may enhance corporate reputation, through an approach that sees it more as a tool of risk management, to considering it a builder of value not just for the corporation but for all its stakeholders as well. The paper focuses on the essential role of the corporate board, bringing very practical guidelines to stimulate and assist any board of a corporation embarking on the journey toward greater sustainability and value creation. The paper concludes with a detailed and invaluable checklist of questions for any board to ask itself. This list helps a board build assurance that it is on the right track. It is as useful to a company just starting on the journey as it will be to those companies already well advanced in creating sustainable shared value and that want to make sure one is not missing any opportunities. -
Publication
Company in Distress?: Directors Needn't Be--Mitigating Risks at the Board
(International Finance Corporation, Washington, DC, 2015-01)Investors see value in nominating members to the boards of companies they have invested in. Through board members, they can help improve the company's operations, define corporate strategy, adjust inefficiencies, improve governance, and ultimately increase the expected return on their investment. The authors examine the shift in the relative position of stakeholders when a company enters the penumbra of insolvency. In good times, directors rightly think of the shareholders as the parties to whom their duties to the company (and legal responsibilities) most directly extend. But once the enterprise s very survival as a going concern comes into question, the profile and legal rights of creditors and other stakeholders take on greater importance. The board must be able to demonstrate that it is doing everything it can to maximize the enterprise value of the company, and hence the likelihood that the company will meet its obligations to parties with claims (on the cash flow and assets of the company) that come before the residual interest of shareholders. This paper lists other actions (including, importantly, documentation of all material decisions) that each director should take to reduce the chances and consequences of subsequent litigation. The authors rightly emphasize the importance of securing reliable information and good-quality outside advice. For the board of a company in distress to be effective and to demonstrate that it has satisfied the duty of care, it is necessary to review the existing flow of information between management and the board and to make any changes needed to ensure that people and processes are in place for the board to receive timely and accurate information. -
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When Do Companies Need a Board-Level Risk Management Committee?
(International Finance Corporation, Washington, DC, 2013)Risk management is nothing new. But the global financial crisis and corporate failures in recent years have put risk management in the spotlight. Who is ultimately responsible for it? Responsibility for risk management should start in the boardroom, as the board is ultimately responsible for the organization's decision making, business performance, and value creation, all of which are associated with risk. The chief executive officer, who is accountable to the board, has the responsibility to ensure proper execution of the risk-management strategy and policies laid down by the board. The board governs while management manages. The board's risk management role should therefore be the governance of risk overseeing, directing, and setting policies and monitoring performance. -
Publication
Corporate Governance and Social Media : A Brave New World for Board Directors
(World Bank, Washington, DC, 2012-09)Publication of secret diplomatic cables through Wikileaks shocked governments and provided a sudden wake-up call to all who thought they were safe from the new power of social media. Consequences went well beyond mere embarrassment; they helped spark the first 'Arab spring' uprising in Tunisia, and other forms of social media helped sustain popular dissent elsewhere in the Middle East and North Africa region. What quickly became obvious is that communications online had a demonstrated a new capacity to upend political agendas everywhere. Widespread use of social media has equal potential to transform corporate agendas. Tools used at Tahrir Square are also available in the capital market for use by directors as much as by disgruntled employees, by consumers both satisfied and aggrieved, by competitors, and by shareowners both retail and institutional in confrontations with the board. By the same token, though, corporations can use social media channels creatively to improve stakeholder loyalty, and improve performance. Corporations can develop new means of constructive dialogue with different constituencies. Benefits might include early warning of threats, identification of new ideas, and amplified means of responding. New communication channels can be a force multiplier and a risk management tool to advance the interests of the business. Still, corporate governance and social media are trends newly met, and market participants are only at the very beginning of a learning curve. Santiago Chaher and James David Spellman do a powerful service by providing a forensic analysis of how social media work. The authors sketch out latest developments. Then they focus on what a forward-thinking board needs to know to ensure that the company is ready to manage the risks and take full advantage of the opportunities presented by social media. Part of the challenge is for individual directors to educate themselves about social media from technology to terminology. They need to know the right questions to ask to test whether the firm is leading or being led. They need to investigate how all the various stakeholders the company affects are using social media. And, most importantly, they have to understand that this is an ongoing, not a one-off, learning process. -
Publication
Guanxi, Mianzi, and Business : The Impact of Culture on Corporate Governance in China
(World Bank, Washington, DC, 2012-09)Before taking advantage of the growing opportunities of the Chinese market, investors will do well to understand the strong influence of Chinese culture on the way businesses operate, how they govern themselves, and how they interact with each other. The author (David Smith) identifies two key cultural and sociological issues of particular interest guanxi (relationships and networks) and mianzi (face). He analyzes their most common implications for investors in areas such as related-party transactions, board composition and deliberations, and shareholder engagement. -
Publication
Redefining Value : The Future of Corporate Sustainability Ratings
(World Bank, Washington, DC, 2012)Corporate sustainability ratings are a potentially powerful but still underused tool for building a competitive, socially purposeful, and financially sound enterprise. In a globalizing world replete with business opportunities and risk, corporate boards continually need to reappraise what constitutes good governance. Traditional board duties pertaining to strategic oversight, executive compensation, and financial auditing will remain integral for the foreseeable future. But these alone will not suffice in a time when the prosperity of companies is inextricably linked to issues such as reputation, brands, supply chain management, quality and quantity of human and intellectual capital, protection of human and labor rights, and climate change. Such emergent issues are part of a historical moment in which the role of companies in fostering societal and ecological well-being at the global, national, and local levels is under increasing scrutiny. These are conditions that fuel intensifying public discourse concerning corporate social responsibility, sustainable capitalism, shared value creation, and other linked concepts that challenge the conventional wisdom that positions shareholder value as the paramount measure of company success. Indeed, sustainability is not new to the two common definitions of corporate governance: (i) the actual behavioral patterns of corporations in terms of efficiency, growth, financial structure, and other attributes; and (ii) the normative framework within which firms operate in terms of legal systems, financial markets, and labor markets.