Tag Archives: corporate governance

Why Words Matter

Created with WordItOut.

Created with WordItOut.

Researchers have recently identified 23 words they term “ultraconserved,” meaning they haven’t much changed since the end of the Ice Age 15,000 years ago. These words—mother, man, fire, worm, and spit, among others­—sound and mean the same in most Eurasiatic language families. The most commonly shared word is “thou” – the singular form of “you”. Imagine that. Among the nearly 700 languages in these families, stretching from Great Britain to Western China, the Arctic to southern India, all of them share a very close version of this word.

Words matter because they allow us to communicate clearly. A decade ago, no agreed-upon phrase existed in Arabic for corporate governance, making debate and reform difficult. An issue can’t be addressed if it can’t be clearly defined. To that end, a CIPE-led effort resulted in the first standardized term for “corporate governance” in the Arabic language: hawkamat ash-sharikat. Developing a common term opened the door for broad-based dialogue on corporate governance in the Arab world.

Sometimes it seems that CIPE has its own language. Look at the word cloud above, created from CIPE’s 2012 Annual Report. Democracy, business, governance, public sector, private sector. These words are probably familiar, but it might not be immediately clear how they work together.

If you look at it more closely, however, you’ll see they are parts of a fully functioning, democratic, free market society. All of the pieces move together—an empowered, informed electorate can hold its government accountable. A strong private sector forms the engine of job creation and economic growth within a society. A true democracy is dependent on its citizens, its private sector, and its government to act in good faith and with good intentions.

Words matter for what they represent. The words in the image above represent the hard work of CIPE’s partners over the last year. Their stories and successes are inspiring, and we hope you’ll take the time to read about them here.

New Rules for State-Owned Enterprises in Pakistan

Pakistan Steel Mills (Photo: The Express Tribune)

Pakistan Steel Mills (Photo: The Express Tribune)

Public sector companies in Pakistan are now losing nearly $4 billion per year — a significant drain on government resources and the overall economy.

Exactly a year ago, CIPE Pakistan Country Director Moin Fudda quoted the Ministry of Finance in a blog post as saying “Inefficient public sector enterprises are draining fiscal resources and choking the economy.” CIPE had been working closely with two key regulators, the Ministry of Finance and Securities and Exchange Commission of Pakistan, to help Pakistan develop a corporate governance framework for state owned enterprises that could help stop the profuse bleeding of government resources.

A presentation made by former State Bank Governor Salim Raza at The Institute of Chartered Accountants Pakistan suggests some key landmarks for Pakistan’s sinking economy. The presentation suggests that by 2017, Pakistan needs to grow at a sustainable rate of 7 percent a year, the tax to GDP ratio needs to be increased by 15 percent annually, the peak energy gap needs to be reduced significantly, and public sector debt must be shrunk by reducing losses by state-owned enterprises (SOEs).

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The Business Case for Corporate Governance

From board selection and strategic decision making to day-to-day operations and legal compliance, corporate governance is a way for companies to create a framework for sound business practices, sustained growth, and risk management. At its core, corporate governance entails an internal control system for transparent decision-making that protects shareholders’ value. However, the significance of corporate governance goes far beyond this basic definition.

First, even though corporate governance has traditionally been associated with large publicly listed companies, it is also of crucial importance to other types of businesses, including family firms, state-owned enterprises, and even small businesses. Those companies also need good corporate governance for long-term sustainability and to become integrated into the global supply chains.

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Business Shows Clear Commitment to Fighting Corruption in Thailand

thailand-iod-participants

Participants at the January IOD training included senior officers from some of the largest local and multinational companies in Thailand.

In late January, more than 30 senior officers from 17 major Thai and multinational corporations attended an intensive anti-corruption training program led by the Thai Institute of Directors (IOD). This pilot two-day training course is the latest groundbreaking step in the Collective Action against Corruption campaign, now in its third year, being led by CIPE and IOD.

With technical and financial assistance from CIPE, IOD has assembled a still-expanding coalition of companies and business associations committed to fighting corruption in Thailand. To join this coalition, a company signs IOD’s Collective Action against Corruption Declaration which lays out tangible and specific steps that a company must take to proactively reduce corruption-related risks on the part of its employees, managers, and vendors. But signing this document is no mere photo-op, because to remain a member of this coalition, a company must submit to an external evaluation to verify whether or not it is actually doing what it has promised to do.

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Improving Corporate Governance in Kosovo’s Publicly-Owned Enterprises

Participants at the Riinvest conference in Pristina

The concept of corporate governance is relatively new in Kosovo. Although corporate governance was mentioned during the discussions and debates surrounding privatization policy in the immediate post-war period, it was not the central point of the debate as it was mainly used to highlight some of the consequences of alternative methods of privatization. The absence of a stock market and specific regulations for private companies, coupled with a low level of awareness, explain the low level of compliance with corporate governance principles. The only group of companies that are legally expected to comply with these principles are publicly-owned enterprises (POEs), which are utility companies offering basic public services to the citizens of Kosovo. Because of their specific features, the way in which these companies are governed is of central importance.

The Riinvest Institute for Development Research, with the support of CIPE, was the first organization in Kosovo to organize seminars and conferences on the topic of corporate governance particularly in POEs. These activities have created a positive impact in this field in the country. By increasing awareness for the need for corporate governance, they have improved the legal framework and also managed to achieve positive changes in the implementation of OECD corporate governance principles.

Over this last year, Riinvest has been working on a follow-up study analyzing the challenges faced by the Kosovo government in the process of strengthening corporate governance in POEs. By using primary and secondary data, this study analyzes the developments achieved from the last evaluation made in 2008.

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Making the Most of an Advisory Board

In his recently published book, Essays on Governance, CIPE Board member Andrew Sherman looks at the myriad issues facing entrepreneurs and business owners. Good governance is crucial to building and sustaining a business in a complex, shifting operating environment. Mr. Sherman, a partner at the international law firm Jones Day, excerpts a chapter from the book in CIPE’s most recent Economic Reform Feature Service article. In it, he interviews Verne Harnish, a thought leader on global growth strategies and founder of Gazelles International, who discusses the importance of “The Council,” a concept first introduced by author Jim Collins in his seminal book, Good to Great. Read the article here.

Article at a glance

  • A reliable set of advisors is crucial when a leader plans to expand the business globally.
  • Leadership teams sometimes must work in untraditional ways to develop a deep level of understanding and trust.
  • Disagreement can be productive and can lead to strong management decisions.

 

Authors Needed for Book on Corporate Governance in Emerging Markets

Several countries in the Middle East and North Africa (MENA) are undergoing full democratic transition and others are looking for new ways to generate jobs and provide economic opportunity for citizens, especially for a growing population of youth. In this context, corporate governance reform has taken on a whole new urgency. More fair and transparent management of local companies will level the playing field for business and encourage healthy economic growth inside the country, while creating an environment of rule of law and openness that will attract investment from outside the country.

Enter Sabri Boubaker from the Groupe ESC Troyes en Champagne and Duc Khuong Nguyen of  ISC’s Paris School of Management in France. With the MENA region in mind, they are editing a new book that will try to fill research gaps they see on corporate governance at both the country and the firm level. The book, to be published by Springer Verlag in 2013, will be called Corporate Governance in Emerging Markets: Theories, Practices and Cases.

What these editors need now are applications from potential chapter authors. They are seeking any experts, academic or otherwise, who have new knowledge to contribute. Are you interested?

The editors are requesting submission of a two to four page proposal by the 30th of November. You can find the official call for authors here with Boubaker’s and Nguyen’s contact information and all the other information needed. Among some chapter topic examples they give are: ownership structure in listed and unlisted firms; the effect of corporate governance characteristics on firm decisions and performance; barriers to effective corporate governance reform; best practices in corporate governance; and recommendations for future application of corporate governance in emerging markets. They are also open to any other relevant ideas.

We hope you apply, and if you do, please mention that you learned of the opportunity from CIPE’s blog!