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Why good corporate governance is great for business

Posted on Oct 4, 2019

When the most famous investor in the world – who is also the third richest – says something about
business behaviours, most of us are inclined to listen. Billionaire Warren Buffet is beating one
major business drum these days – good corporate governance.
In recent years, business decisions have been made largely with only shareholders’ profits in
mind, but the tide is turning.
Successful institutional investors know bad corporate governance increases the risk of a business
going bankrupt or being caught up in a reputational scandal. But strong corporate governance
could mean the opposite – higher profits, greater efficiency and billions in potential capital
investment.

Turning a blind eye

In 2001, the scandal about American energy company Enron broke. The fallout resulted in the
largest bankruptcy reorganisation in American history at the time – and it was all about bad
corporate governance.
Yes, Enron had structures and mechanisms in place for good corporate governance, but its board

of directors turned a blind eye to open violations of code. And auditors failed to prevent
questionable accounting practices.
Enron’s shareholders were not happy and hit them where it hurts. They filed a $40 billion lawsuit
after the company’s stock price fell. Shares had fallen from a high of $90.75 per share in mid-2000
to $1 by the end of November 2001. Bankruptcy came on 2 December 2001.

Eyes wide open

Compare this disaster to the success of some large corporations in the Middle East and North
Africa (MENA), where good corporate governance has led to billions in capital, increased efficiency and productivity.
A recent report, Corporate Governance Success Stories, from the International Finance Corporation (IFC) at the World Bank Group, found consistent results for more than a dozen MENA companies that implemented and lived by strong governance codes.
Nearly all companies rated the corporate governance impact on their ability to access finance as “strong or substantial”. The changes helped these firms access significant financing over the past two years, ranging from $2.5 million in one company to $1.5 billion in another.
The corporations also reported that their reputations greatly improved with all market players, from customers and clients to investors and regulators. Business became easier to do when they were respected for keeping their eyes and ears open for bad practices.

And a majority of companies reported that the governance changes had a strong or substantial impact on organisational efficiency as well as profitability.
Warren Buffet knows that good corporate governance is good for business.

Working for the greater good

To get down to the nuts and the bolts of Mr Buffet’s why, he calls for better corporate governance for the sake of creating a secure financial future for all – consumers, citizens, employees and investors. So if you’re a director of a company or a shareholder in one, what is it that this billionaire wants of you?
In 2016, he and 12 other business titans wrote an open letter to the business world, outlining common-sense standards for better corporate governance. The group, which consisted of major CEOs such as Mary Barra from General Motors and Jamie Dimon from JP Morgan Chase, outlined governance principles in a nine-page open letter.
Here are just some of their guidelines:
  • A board must not be beholden to the CEO or management
  • All directors must have high integrity
  • When it comes to directors’ compensation, the group calls for a “substantial” (50% or more) portion of company stock to be used for this pay – the idea being that directors’ and investors’ goals would be better aligned as a result
  • Boards need diversity – they should be large enough to allow for a variety of perspectives
Over to you.
Since 2016, more big shot CEOs have signed up. Among the 23 signatories are CEOs from Coca-Cola, Procter & Gamble and Johnson & Johnson.
In a more recent statement from Warren Buffet and his allies, he emphasised that their work was not an “academic exercise”. His group said: “We ask others to join us in committing to these principles and to a more secure financial future.”
Are you a member of board? Have you got what it takes to take on Mr Buffet’s challenge, not just for the sake of good corporate governance, but to attract more capital and increase your business’s efficiency and profitability?
If you’d like help transforming your board/ management culture with these principles in mind, please get in touch with
margaret@clearink.ie to discuss your needs or ring 087 207 0495

Setting your priorities as a CEO

Posted on Sep 10, 2019

Two questions: Are you a CEO? Is your primary goal to maximise your shareholders’ profits?
If you are a CEO and you answered yes to that last question, you are
most definitely not alone.
Serving your investors’ needs first and foremost, and above all other
competing interests, is what we’ve come to know in corporate lingo
as “shareholder primacy”. This concept – that a corporation’s main
duty is to maximise value for the shareholder – while always to the
forefront, became very prominent in the mid-1980s. And from then
on, shareholder primacy became a widely accepted governance
norm.

Attitude shift

But this summer, dozens upon dozens of America’s most powerful
CEOs said otherwise. CEOs from the likes of IBM, Fox, VISA, Walmart,
JP Morgan Chase and Mastercard signed a manifesto-type statement
calling for a balancing of interests.
These CEOs are part of a 192-strong group called the Business
Roundtable and, on 19 August, 181 of them signed a document
called the Statement on the Purpose of a Corporation.
At the start of this article, we ask if your primary goal as a CEO is to
maximise your shareholders’ interests. Maybe you said no. Perhaps
you feel your business would not exist without your customers, so
that’s who you serve first. Or maybe you believe your organisation is
only as good as your employees, so their needs are paramount.

What’s your purpose?

The 181 CEOs in America believe a corporation has five equal
purposes:
  • Delivering value to customers
  • Investing in employees
  • Dealing with suppliers fairly and ethically
  • Supporting the wider community
  • Generating long-term value for shareholders
Does this all seem too much to take on and a bit idealistic?
When these 181 CEOs made their declaration public, there was lots
of reaction.
Joe Kennedy, of the famous political dynasty and a member of the
US House of Representatives, said the CEOs’ statement was “a
welcome step toward a more moral capitalism” and the US Chamber
of Commerce said it “agreed wholeheartedly with the renewed

focus”.
America’s longest-serving Independent politician, current Senator
and presidential hopeful Bernie Sanders welcomed the statement,
but he also said America needed more than a “public relations
stunt”.
On the not-so-agreeable side, was the Council of Institutional
Investors, who “respectfully disagree[d]” with the statement.

Looking inwards

Also not so agreeable was academic Charles Elson from the
University of Delaware. This was not because he disagreed with the
sentiment of the statement, but because of who was saying it.
“They talk about their great concern for the workers – well they’re
the ones who’ve paid themselves so astronomically and created
these pay gaps that are so dramatic. I’d like each of them to
volunteer to cut their own salaries by two-thirds and give it back to
employees, if that’s the way they feel,” Mr Elson said.
And he’s not wrong. According to the Economic Policy Institute, CEO
compensation has grown by 940% since 1978, while employee
compensation rose just 12% in the same period.

CEO dilemma

So what’s a CEO to do? Would you take a cut and share out the
difference among your employees? How happy are you to pay into a
pension fund or give paid paternity, indeed even maternity, leave to
your staff? Would you give a percentage of your profit to offset a
negative and unintended consequence of your business’s operation?
Do you allow your employees to unionise?
Like anything in business – be that being proactive about data
protection or taking your environmental footprint seriously – there
are two ways to look at changes in culture. You can embrace the
change, invest accordingly and hopefully ride on a positive wave of
success; or you can resist, oppose and perhaps lose out in the long
run.
Who you serve first as a CEO is a matter for you and your board but,
just like the 181 CEOs in America said, there are many actors who
contribute to the existence of your business.
It’s a balancing act. And like one of the world’s greatest minds,
Albert Einstein, said about balance: “Life is like riding a bicycle. To
keep your balance, you must keep moving.”

The keys to a successful digital transformation

Posted on Jul 26, 2019

76% of people living in the world’s 18 advanced economies own a smartphone.

Nearly every adult on this planet has a mobile phone. Out of 7.5 billion of us, five billion have phones, over half of which are smartphones. This has happened since 2007, when the first iPhone came on the market. The digital revolution has been rapid and unrelenting – and for most businesses, it’s meant survive or die.

How have you fared?

According to the Pew Research Centre, if your business is based in a country with an advanced economy, digital transformation isn’t just a matter of aspirational policy; it’s the difference between life and death.

(more…)

Is poorly designed work reducing your workers’ productivity?

Posted on Jul 10, 2019

36% of millennials/Gen Z spend at least two hours of their working day on their phones, carrying out personal activities.

It’s the height of the summer and staff members are taking holidays. It may be September, or even October, before your entire team or workforce is back under the one roof.

Summer is often the time when staff members’ level of distraction is at its most obvious – but it is also the perfect time for management to tackle distraction and boredom in the workplace head-on. You can implement strategies that will stand to you for years to come.

(more…)

Helping employees through change

Posted on Jun 18, 2019

Only about one in four transformations succeed.

The only constant we can be certain of is change. As we prepare to move into a new decade, the companies that will win in the 2020s are the ones that are proactively designed to adapt to the world’s constantly shifting realities.

These realities will include the wider roll out of artificial intelligence, a more diverse workforce, an ever-greater emphasis on data protection and strictly enforced regulations designed to protect the environment.

(more…)

Leading the way to more family-friendly workplaces

Posted on Jun 4, 2019

The cost of childcare is often described as a “second mortgage”.

Childcare is the real glass ceiling. There are two key things that make this so. Firstly, men earn more than women in Ireland. The gender pay gap currently stands at 14% and, in some professions, that goes up to 30%.

Secondly, the cost of childcare is often described as a “second mortgage”. In some parts of the country, it costs as much as €308 a week for one child. So, when it comes to returning to work after having your child – faced with crèche fees versus your take-home pay each month – is it any wonder the job that brings in the lower salary, inevitably the woman’s, will be the one sacrificed when it comes to paying for childcare over doing it yourself?
(more…)

Feargal Quinn’s big regret revealed in one of his final interviews

Posted on Apr 26, 2019

He revolutionised Irish retail, held five honorary doctorates, was father to five children and grandfather to 19 and, when he ‘retired’, he became a Senator and a broadcaster, but Feargal Quinn had one regret.

It was a regret he hoped would provide inspiration for other entrepreneurs. “I didn’t open my first shop until I was 23, I should have opened it at 21,” he told Margaret E. Ward on the Broadly Speaking podcast during the summer of 2017. “Start earlier than you’d planned,” he added.

(more…)

Dressing for success is hard work

Posted on Apr 23, 2019

Dressing for success is hard work

In a business casual world, is the old adage of dressing for success obsolete? Not quite.

When getting dressed for the office, we’re beginning to take style tips from Facebook’s Mark Zuckerberg, rather than Mad Men’s Don Draper. While sharp suits, fancy dresses and high heels may still be seen in some workplaces, employees are increasingly opting for a more casual style, with a greater focus on comfort. Suits are out and techie casual is in. (more…)

How to deal with underperformance

Posted on Apr 12, 2019

How to deal with underperformance - Broadly Speaking

Regardless of the approach, performance management is a key part of your role as a leader.

How to deal with under performance

The very thought of an annual performance review is enough to strike fear in some managers and employees. This is a time-consuming process filled with awkward conversations, often pointless metrics and contrived goals, but is it also the ultimate ‘tick-the-box’ exercise?

A number of major companies have dispensed with annual performance reviews and instead use a less formal and more continuous approach to staff assessment.

(more…)

The quest for flexibility

Posted on Mar 19, 2019

Quest for flexibility

“Happier employees equal a more productive workforce.”

The quest for flexibility

What would you do if you won the lottery? Maybe you’d choose to build your dream home, travel more, retrain and change career or support causes you believe in. Whatever your answer, it’s a good way to see what choices you’d make if money was no object.

What if time wasn’t as much of an issue? What would you do with an extra four hours a week? Work more? Exercise more? Read more? Watch more tv? Simply take the time to have a coffee and think?

Between the pressures of work, family, commuting, hobbies, life admin and unexpected bumps in the road, there never seems to be enough time for everything we want to do.

(more…)

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