Day 2 of our partner conference here in Manila, and Hammad Siddiqui from our Pakistan office is talking about corporate governance of family-owned firms—a big issue here in Asia. Often people think of corporate governance as being just about big publicly traded firms, but good corporate governance can be an enormous boost to the operations of small businesses and to family owned firms of all sizes.
After all, CG is about ethics, disclosure, transparency, accountability, responsibility, etc. And while few would question the need for responsibility and accountability in any firm, when it comes to issues like disclosure and transparency, sometimes the need is less obvious to those in closely held firms. Who are they supposed to be open with? Yet the truth is that unresolved conflicts, lack of delegation, lack of documentation, and lack of inclusive decision-making processes are real weaknesses for family firms. Succession planning is about more than anointing the next in charge; it’s about establishing institutional processes within the firm and about fostering management skills as part of a continuous learning and growth effort. If such skills have not been fostered and exercised prior to a management turnover, the learning curve is steep and treacherous.
Corporate governance is an area where CIPE has really been a leader—first by focusing on CG long before it was fashionable and also by recognizing its importance beyond a narrow range of firms. Our partners in Eastern Europe were a big part of building our approach to CG as far back as the late ’80s and early ’90s, long before anyone had heard of Enron or various banking crises. Their leadership, and that of the late Marek Hessel from Czech Republic, lives on in the ongoing work of CIPE partners around the world.
One example right here in Philippines is the work of the Institute of Corporate Directors on publicly traded companies. Using a standard measure grounded in OECD principles of shareholder rights and roles, equitable treatment of shareholders, disclosure, transparency, and board responsibility, ICD has helped many firms meet compliance standards and then move beyond compliant box-ticking to deliver breakthrough performance results. Average CG scores have increased here from an average 53% to average 72% in just three years, and ICD is really hitting its stride in changing attitudes and actions as CG is becoming an accepted standard practice here.
Published Date: January 28, 2010