Trends and issues in corporate governance

1
Trends and issues in corporate governance

• Marshall Keys, Ph.D.
• Governance Committee

2
Varying standards of governance

• Privately or closely held companies
• If you are Jerry Kline or Francisco Partners, you
  can do anything you want
• Publicly traded companies
• The Securities and Exchange Commission or
  Serious Fraud Office may come calling
• Not-for Profit organizations
• Exchange transparency (IRS Form 990) for freedom
  from taxes

3
Trend Convergence between for-profit and
not-for-profit standards
4
Convergence

• For-Profits
• Enron, Worldcom, Tyco, Faxon
• Greater transparency
• Increased government oversight
• Greater scrutiny of management

• Not-for-profits
• Fiduciary responsibility
• Smithsonian, CLASS
• Greater scrutiny of management

5
Issues for corporations

• Changing board recruitment and selection
• Recruitment in a high liability environment
• Realigned Board responsibilities
• Representing the interests of shareholders and
  stakeholders
• Assessing corporate strategy
• Independently evaluating risk
• Evaluating management and linking pay to
  performance

6
Not for profit issues

• IRS 990 revisions
• Pay for performance
• Conflict of interest
• Recruitment becoming harder all the risk for
  lower or even no pay

7
Recruitment changing skill sets

• Core competencies
• Strong financial skills
• Global outlook and knowledge
• Cultural sensitivity
• Understanding of legal and regulatory
  environments

• Behavioral competencies
• Ability to accept responsibility and still sleep
  at night
• Ability to make decisions with imperfect
  information

8
Well-constructed governance

• Unity Do all aspects of governance contribute
  to the organizational purpose?
• Order Is the structure comprehensible?
• Completeness
• Well, thats the hard part

9
Decision modelsHarvard Business School

• Generate options that are
• Collectively exhaustive
• Mutually exclusive
• Voila -- The answer!
• Most HBS decisions are quantifiable
• value x probability of outcome decision
• But our decisions are often based on values

10
Governance Committeenot a perfect
decision-making environment

• The ability to make decisions
• with imperfect information

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Not a perfect model, a minimalist governance
model

• Architect John Pawson
• Minimalism is the attempt to achieve a state to
  which nothing can be added or subtracted!
• Like Aquinas,
• If you accept the premises,
• The conclusions all logically follow!