Risk oversight should not be viewed as a process unto itself — it’s the foundation for everything the board and management do to properly govern the organization and make sound decisions. Many boards frame their activities for the oversight of risk into two areas: oversight of enterprise risk programs (risk management), and oversight of critical risks and risk decisions (risk governance). The latter includes setting risk appetite and risk tolerances, and monitoring strategic risks and related trends.
Yes. Think about great athletes. They practice thousands of hours to ensure that in the crucial moment, when the heat is on, they make the right play, catch or basket. I believe we, along with our leaders and institutions, need to apply this same discipline. We need to go to the ethical gym. We need to test and flex our ethical muscles and develop into ethical athletes so that under pressure, we do the right thing even if it's inconvenient or unpopular.
I can't think of a person whose life's work better stands as a testament to the notion of living a principled life. Elie Wiesel has dedicated himself to the idea of defending and living by ethical principles and values no matter how unpopular or dangerous. We are immensely proud to join with him and the Foundation as the sole corporate sponsors of the Elie Wiesel Prize in Ethics and in helping students to consider ethical issues at the most intellectually formative time of their lives. The Elie Wiesel Prize in Ethics Essay Contest was established as an annual competition designed to challenge college students to analyze the urgent ethical issues confronting them in today's complex world. Students write thought-provoking essays based on personal experience that raise questions, single out issues and are rational arguments for ethical action. Thousands of students from hundreds of universities across the nation have participated over the years. This year marks the 20th anniversary of the prize, and we are planning several special elements to the prize in recognition of the Foundation's great work.
Effective corporate governance, or good corporate governance, should help the corporation function more effectively over the long term, to the benefit of all stakeholders – by identifying, analyzing and managing risks; pursuing opportunities; mitigating negative impacts; and improving triple bottom line performance (planet, people and profit).
Your business can change in a heartbeat — and it probably will. In times of crisis or market fluctuation, the board may need to be more engaged in helping management create solutions. Executive teams who are working to execute strategies, especially in challenging economic times, need their board to be aligned behind a flexible model that’s able to shift based on business needs. A board that’s not aligned can cause the company to become “stuck” — unable to be agile when it needs it most.
Absolutely, but one course is not enough. Just as Aristotle said that excellence is not a single act but a habit, I believe we have the opportunity to become excellent at pursuing performance in a principled and consistent way. I believed firmly that today, success is derived less by what and who you know and more about how you conduct yourself.
Absolutely not. There are two fundamental approaches to governance. The stakeholder model (found in many Asian and continental European countries) assigns rights and responsibilities to a broad group of constituencies, “stakeholders,” including: banks, bondholders, employees, the government and local communities or society at large. The shareholder model (found in all common law countries and in a diverse group of countries worldwide) maintains that ownership is key and therefore the shareholder is the primary focus of governance.
Our education offerings inspire a higher standard of behavior, resulting in not only compliance with the law but also a sustainable business advantage. Our education programs address the spectrum of learning needs through online and offline education that includes live forums, facilitated workshops and creative learning experiences - multiple approaches to reach, engage and educate a global workforce, no matter where they are in the world. Our education offering includes the industry's most comprehensive online ethics and compliance library, with more than 500 courses covering thousands of topics and hundreds of risk areas. These courses range in topic areas, from how to outbehave and outgreen the competition, to how to write thoughtful emails, to inspiring ethical leadership, to preventing workplace harassment, recognizing conflicts of interest, ensuring data privacy and protection, ensuring financial integrity, among other topics and risk areas.
Corporate governance refers to the structures and processes for the direction and control of companies and concerns the relationships among the management, Board of Directors or Supervisory Board, controlling shareholders, minority shareholders and other stakeholders. Good corporate governance contributes to sustainable economic development by enhancing the performance of companies and increasing their access to outside capital. 1
The dynamics of our more connected and trparent world have placed a premium on our conduct. Today, how we do what we do more than what we do determines whether or not we survive and thrive. Today, everyone can see easily and deeply into our companies. Competitors can see, study and copy what we do. Customers and employees can see whether we're keeping our promises to them. And shareholders, community members and regulators can see how we're achieving what we say we're achieving. Our connectivity and trparency has placed a premium on conduct: as a result, the expectations we place on our conduct, as business people and human beings, are higher than ever. With these expectations come opportunities to embrace behavior as a unique and renewable source of sustainable differentiation. Companies that succeed in shaping employee conduct now have a unique opportunity to outbehave the competition.
Good governance entails policies, practices, procedures and systems that strengthen the corporation, reaping internal benefits: clear governance policies, practices and procedures; improved oversight and supervision; sound organizational management; heightened risk awareness; management and mitigation; compliance with regulatory and self-regulatory requirements; appreciation and recognition of corporate citizenship; strong corporate reputation; and good triple-bottom line performance. These internal benefits in turn create and reap external benefits, including: better marketing of the corporation’s products and services; liquidity of the corporation’s bonds and shares; maintenance of corporate reputation; and improved access to capital.
The whole notion of sustainability is critically important. We need our leaders and institutions to re-conceive of how they build for growth. We need to abandon the kind of short-term thinking and short-sighted decision making that got us into our current economic troubles and instead focus on building truly sustainable enterprises. In its most important sense, sustainability is a long-term, integrated platform for innovation, growth and significance that requires a long-term commitment to how a company relates to people (employees, partners, customers, investors), to its communities and to the larger societies that give it permission to operate, and to the environments in which it conducts business. Building a truly sustainable company requires a shift in thinking and adoption of new habits where companies not only assert great values, they live them.
Proponents of the Chicago School would argue yes, because the shareholder is the focus of the model, whereas proponents of the stakeholder model would argue no, because the shareholder is only one of many stakeholders to whom the corporation is accountable. Equating corporate governance with maximizing shareholder value reduces the focus of corporate governance to creating “external” benefits for shareholders alone. This is not the sole purpose of corporate governance.
The reduction of corporate governance to maximizing shareholder value is not only wrong in principle; in practice it has led to dramatic failures, such as the recent and ongoing global financial crisis.
detractors will cite alternative research which finds no relationship between good governance and financial performance. Detractors explain that socially responsible investment (SRI) relies on negative screening, thereby reduces the size of the potential portfolio and therefore decreases financial returns.
This is an outdated and simplistic view of SRI. Similarly, the use of the term “non-financial” suggests to me an outdated view of risk management. Today the financial industry embraces the term “extra-financial” and assigns the indicators to three categories – environmental, social and governance. These indicators are analyzed and managed due to their direct and/or indirect impact on triple bottom line performance.
As a business LRN is helping business leaders and organizations find advantage and a new approach to winning by inspiring values-based behaviors and organizational culture. We are helping companies and their leaders build enduring legacies by utilizing principles as the foundation to how they do what they do. In the process, they're finding they are earning reputation, engendering trust in key relationships, growing customer loyalty, increasing employee engagement and winning by outbehaving the competition. All of this is the surest path for sustainable differentiation in the 21st century.
Performance today is about much more than just numbers. At LRN, our mission is to help inspire principled performance in business. We help companies ensure they pursue their business endeavors in a principled way, day in and day out and in every corner of the world.
In most circumstances, the board plays an oversight role. However, depending on the issue or the company’s situation, the role of the board can swing from overseer to active participant. Typically, we see boards more actively involved in strategy and CEO succession than, say, operations and planning. Still, finding the right balance can be difficult. While there’s no right wer, it’s important that board members and executive management agree on how involved the board will be in key areas.
An organization’s success is, in large part, driven by how wisely it takes risks and how effectively it manages the risks it faces. The enterprise’s culture comes into play here because people tend to do what they are rewarded to do. When selecting, evaluating, and compensating the CEO, the board sets the tone of the organization’s risk culture. It’s important to think through all potential implications - ntentional and unintentional - of executive rewards to make sure the board is encouraging people to take risks intelligently. Similarly, the board should also understand how incentive programs implemented throughout the organization may influence the risk culture below the C-Suite.
A well-designed assessment can give you a read on the board’s performance in each area of responsibility — strategy, performance, risk, and more. Does the board meet basic regulatory requirements? Follow common practices? Or even set the standard that others follow? Careful evaluation of skills and knowledge, process, information, and behavior can pinpoint areas of excellence and development opportunities, helping boards and executives understand which areas may need attention. This requires a fresh approach to board effectiveness assessments, which have tended to measure only past performance. A focus on what the board can do better in the future should be the core of the assessment, not simply an afterthought to address gaps in past performance.