Monthly Archives: January 2016
We at Anglo American Platinum pride ourselves on the logic and rigour of our governance processes, from the development of strategy, policies and procedures, through to their implementation across our operations. But it is the commitment of our board, our management team and all our employees – at head office and the operations – that has made it possible for us to receive this prestigious 2016 Best Corporate Governance in Mining in Africa Award. We are delighted to receive this award and regard the findings of the independent assessors of Ethical Boardroom as confirmation and encouragement that we are getting things right.
As the World Economic Forum (WEF) points out each year in its annual Global Risks Report, company boards deal with a multitude of interconnected risks. Over time, the profile of these risks has changed and in 2015 they include water scarcity, skills shortages, risk of financial crisis and migration challenges. In other words, business risks are a proxy for the acute challenges we face as a society. Adding to the difficulty of managing these risks, WEF has highlighted that they are interconnected – they cannot be isolated and managed in a silo. This poses a particular challenge for boards: how to identify and manage risks that cut across the business environment and do not fit easily within the departmental hierarchy of the organisation.
Volkswagen’s toxic mix of evolving and growing compliance risks (that should typically be caught in a robust enterprise risk management and compliance system) with the presence of strategic risks (that the board is responsible for overseeing) yielded what I would call the perfect reputation risk storm of 2015, or maybe even the decade. Embedded in this crisis were several underlying and neglected compliance and strategic risks that explain why this scandal unravelled so quickly and had such a dramatic and immediate impact on stock price, car resale value, stakeholder value and more.
Shareholder activism has taken the investment community by storm during the past five years and is now considered to be a mainstream form of investing. According to Hedge Fund Research, the war chests of activist funds skyrocketed to a stunning $121.8billion in assets under management in the third quarter of 2015. Institutional investors of all form – from public pension funds and college endowment funds to family offices – are deploying a growing percentage of their assets with activist funds. Even retail investors can now obtain exposure to an activist investment strategy by investing in open-ended mutual fund[s] whose strategy is to invest in securities of companies subject to activist campaigns. Shareholder activism is showing no signs of slowing down as the number of activists continues to grow.
Never in the history of human endeavours has it been easier for individual enterprises to reach around the globe for raw materials, labour, financing, market opportunities and economies of scale. But in this exciting world of business prospects also lies new and vexing challenges. Simply put, the increasingly global marketplace giveth and it taketh away.
The US Government’s Financial Crisis Inquiry Report, issued in 2011, concluded that dramatic failures of corporate governance and risk management at many systemically important financial institutions were key causes of the crisis. This article suggests that in order to fully restore public trust and confidence in the banking sector, further measures need to be taken to enhance banking governance.
The tide of shareholder activism keeps rising around the world, not only in the US but also in Canada, Europe and Asia. In this era of shareholder activism, the board of directors of a public company should review and evaluate its company’s structural defences to activist hedge funds. Companies pursuing an initial public offering (IPO) are well advised to go public with the most state-of-the-art defences available. Following an IPO, the adoption of certain structural defences requires shareholder approval, which is often an insurmountable obstacle in today’s pro-activist climate.
In recent years, and particularly since the financial crisis, many companies have been working to upgrade their corporate governance. This has been driven in part by foresighted initiatives at some companies and industry groups, but mainly by external pressures from shareholders, stock exchanges and regulators. One area where bank and insurer regulators have been increasing their focus is so-called ‘group supervision’.
Board members and executives are increasingly aware that a lack of governance creates risk, limits achieving organisational best and increases overall cost to the organisation. As a result, many executives now demand a seat at the information governance (IG) table when developing policies for the information their organisations create and collect. This is a positive evolution from a time when requests by IT and records information management (RIM) stakeholders for executive participation were often ignored, making programme approval difficult to obtain.
As board adviser, we have been asked many times by our clients, to help them organise and manage the ethical challenges of their organisations. “Something easy, so that it may be supervised... a kind of ethics KPIs,” some have said. However, corporate ethics is obviously a difficult matter to be systematised; given that it depends upon several human subjective factors that are not easy to standardise
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