SOE Reform and Corporate Governance
Justin Bancroft14 February 2013
What is CG“Corporate governance includes all types of firms whetheror not they are formed under civil or common law, ownedby the government, institutions or individuals, privately orpublicly traded”.Turnbull
“The Board of Directors is the epicenter of corporate governance,the arena in which all of the mechanisms of governanceare required to respond to market signals andinstitutional pressures in order to secure the commercialviability and accountability of the business”.Clarke
Who we areBICG represents Baltic board professionals and their companies by:
MISSIONBICG delivers value to its stakeholders by promoting global competitiveness of Baltic companies through adoption of leading corporate governance practices
VISIONBICG is an internationally recognized driver of best practise corporate governance in the Baltic region. ValuesTrust, Integrity & Excellence
To avoid confusion in terminology“Board” – Board of Directors or Supervisory Board or Supervisory Council, i.e.a collective body elected by the shareholders to oversee the management of thecompany on their behalf
“Director” – a member of the Board of Directors or Supervisory Boardor Supervisory Council - “executive director” – a director who also has employment relationship with the company
“non-executive director” – a director who has no employment relationshipbut may have other material (commercial, family, etc.) relationshipwith the company
“independent director” – a director who has no other relationshipwith the company but serving on its Board
“Executive team” – Management Board or Executive Board, i.e. managers employedby the company and responsible for running its day-to-day business;reporting to the Board or directly to the shareholders
Nordic Governance Model
Baltics
Norway
Finland
OECD
OECD
• Setting objectives• Reviewing performance• Auditing performance• Reporting on Performance• Ensuring full disclosure and
transparency at the company level
Alternative
Alternative?
BICG members
Guidance
Some Basics
14 February 2013
What is CG
• The Board is one part of the Management• The most important task is to stimulate the
CEO/Managing Director to do the Right things
Without Supervisory Councils- an important part of management is MISSING!
The Board should work with the following questions:
• Where are we?• Where should we go?• How should we get there?A Business Plan with these questions should be produced and followed up
A Board with such a task and rolemust be an active Board
A competent Board
• Takes active responsibility besides what is expected by a pro-forma-board
Why a Board
• The broad judgment, experience and network in a well composed competitive Board has a great value
• This could be one of the most valuable assets in a company as advisor and speaking partner
A Board functions if it is
• well informed• works well• has right composition• has good coordination
Works well
• Every month the Board should have the following reports …
• P&L statement• Balance sheet (liquidity)• Management accounts/Dashboard• In a letter from the CEO covering reports,
changes, important issues and other news
Works well
• Every year the Board should make a working plan
Works well
• 4-5 meetings planned• One important theme per meeting• Documents in due time• Decisions summarized to avoid• misunderstandings• Minutes approved and distributed a.s.a.p.
Signals regarding poor work
• Meetings rare and irregular• Meetings postponed• No contacts between meetings• Only pro forma matters• No plans for the future• No documentation in advance• Poor minutes• Only the chairman and the CEO are acting
Has right composition
• Question makers• Vision makers• Consensus makers• Politicians• Changers• Proposal makers• Pushers
Has good coordination
The chairman is responsible for• The Meeting• The Annual program• Taking initiatives• Follow up decisions
Has good coordination
• The ideal chairman• Knowledgeable about the business• Stimulating the CEO• Strong position• Support from owners• Time to assist the CEO• Good listener• Demanding• Fast decision – but mature
Has good coordination
• Can you contribute• Do you have time• Keep informed• Take full responsibility• Respect confidential matters• Be aware of laws and regulations• Put the company’s interest first• Extra work approved by the Board• Leave in due time and of the right reason
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