Corporate Governance: Global Issues for the Future

Nada K. KakabadseProfessor in Management and Business Research

Northampton Business [email protected]

http://www.kakabadse.com

Corporate Governance: Global Issues for the Future

EABIS Colloquium

19-21, September 2009, Barcelona,

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Change Drivers:

• New technologies – e.g. Pursuit of paradigm shift from fossil fuels to alternative sources; radio-frequency identification (RDF) of goods, animals and humans; nano-technology

• Economic conditions - Impact of global financial market failure

• Political conditions - Transition from context of industrial and political structure of current mono-polar world to multi-polar world, 2020, mass-immigration, socio-political wars

• Demographics – population growth, education workforce, movement, poverty

• Global Climate - floods, droughts,

• Government Policies – New institutions – e.g. create new private/pubic institutions to manage consequences from climate change

• Two engines of progress - Our desire to understand the world and Our desire to reform it (Bertrand Russell)

It is through our knowledge and misunderstanding that we can create and/or destroy our future depending on choices we make!

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• 1920s: Conceptualisation

• 1960s: Experimentation (unassuming mentally ill patients, nursing-home patients, radical groups and incarcerated individuals, both in developed and developing economies).

• 1990s: General use in products, animals, humans.

• 2004: Food and Drug Administration (FDA) approved the “VeriChip implant” for medical use in humans.

Carlos Altamirano, Mexico's attorney general and 160 of employees (to allow access to secure areas)

Nightclubs in Rotterdam, Barcelona and Glasgow use membership implants instead of membership cards Homeless in New York, San Francisco, Washington DC and

Bethlehem, Pennsylvania are tagged.

RFID (radio frequency identification) Chips

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Right and left ear tags allow the rancher to control the location and directional movement of animals with GPS established boundaries form a

remote location

Source: US Department of Agriculture, Agricultural Research Service, 2005

Fenceless Borders: Virtual Boundaries and Invisible Control

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Technology: Micro and Nano

“VeriChip” implanted in Mexico's attorney general Carlos Altamiran in 2004

Source: The Associated Press (2005)

1st generation nanostructures (- 2000): Passive nanostructures – Dispersed and contact nanostructures: aerosols, colloids; and Product incorporated nanostructures: coatings, nanoparticles reinforced composites, polymers, ceramics

2nd generation nanostructures (- 2005): Active Nanostructures - Bio-active, health effects: targeted drags, biodevices; and Physico-chemical active: 3D transistors, adaptive structures

3rd Generation nanostructures (- 2010): Systems of nanostructures – guided assembling, robotics, evolutionary

4th generation nanostructures (- 2015): molecular nanosystems – molecular devices ‘by design’.

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Basic Questions?

• Do we share the same meanings about CG/CSR?

• Do we share the same aims: CG/CSR?

• From whom we learn?

• With whom can we learn?

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What is Governance?

• An action led reflexive journey - Individuals/Organisation /institutions are continually on the road to good governance

• Multi Perspective

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Growing Concerns

• Governance - global and corporate (e.g. global warming, security, poverty, economic recovery, human rights, inclusion access)

• The impact of social engineering: state-private sector experiment (e.g. privatisation of telecom, utilities, health, education, corrective services; bailing out of corporations)

• Bio diversity (e.g. environmental degradation)

• Financial markets (e.g. Responsible globalisation)

• How much money company's elite/shareholders make?• How profit is generated (i.e. Is it in a responsible manner –

environment, human rights, labour rights within organisation/supply chain)?

• Societal values

• How to integrate 4 Ps: people, planet, profit, posterity?

People (Society): Hero-leaders/Uni-polar world to inclusivity/diversity

Profit (Economy): Shareholder financing to alternative modes of financing

Planet (Environment): Extraction mentality to nurturing mentality

Posterity (Values): Instant gratification/consumerist values to long lasting values

Sustainability

4 P’s Transition for Sustainability

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Need to consider!

• Currently:

• Concentrated financial system (e.g. large institutions)

• Focus on shareholder value

• Socialization of losses and privatization of gains

(bailing out banks/firms or shareholders and bondholders;

liquidity and risk insured by government)

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Need to explore

• What kind of financial system do we desire?

• What functions should financial system performer?

• How should financial system be governed?

• How to govern/navigate the esoteric space between

market and non-market forces?

• How to minimise "the abuse of entrusted power for

private gain" (i.e. corruption)?

• How to transit to new systems/ways of working?

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Key Factors for effective CG

• Purpose - Being clear about purpose• Vision – Being clear what is desired future• Performance

Clarity of function of governing body Roles and responsibilities between executive and non-executives Relationship between governing body and the public

• Values Embed organisational values into practice (Individuals behaviour

reflecting organisational values)• Transparency

Being rigorous and transparent in decision making Using good quality information and advice Adopting effective risk management policies

• Effectiveness Developing skills, evaluating performance – individuals/groups Balance between continuity and renewal

• Accountability Dialogue with and accountability to the stakeholders/public Active responsibility for employees, product/service provided Understanding formal and informal accountability relationships

Key Factors for effective CG