Getting started with the business of trust
“Corporate Governance is about promoting corporate fairness, transparency and accountability,” according to J. Wolfensohn, President of the World Bank. It is a kind of corporate democracy that value-investors like Warren Buffet have long advocated. The wave of corporate abuses that surfaced over the past three years however has drawn Corporate Governance from theory to practice. The Sarbanes-Oxley Act in United States and the Higgs Report in United Kingdom, although sharply different in approach, share tremendous similarities in nearly all fundamental areas of Corporate Governance, including but not limited to: majority of independent directors, auditor independence, the separation of CEO with the Chairman of the Board, as well as the integrity of the financial statements.

Winning the Competition for Capital
Gone are the days when investors paid tribute to traditional performance indicators. Price-to-earnings ratio and plain vanilla earnings growth no longer count in the way they used to. Whereas stocks with steady growth rates have always been the market’s darlings in the past, today’s investors wish to see more consistent financial reporting, less extraordinary charges or income and more active independent directors. By the same token, the market no longer trusts management that lies or attempts to hide financial problems - even when companies are playing by the rules.

Accounting and corporate scandals gave rise to negative externalities in the market place. Institutional investors in the United States for example, have become more active in corporate life, requiring Boards to meet their expectations in terms of performance, transparency, accountability and equal treatment of all shareholders.

Scarce investment capital is now in search for sound governance systems that embrace these corporate virtues. That is why Corporate Governance is no longer just an option. In actual fact, strong Corporate Governance practices have become a necessity for publicly traded companies across the globe due to the enormous opportunity costs, ranging from the cost of debt and equity to share price performance, relative to competitors.

It is up to you to decide whether your goal is minimal compliance with basic principles or a serious effort to improve your Corporate Governance by adhering to global standards of best practice.

What we do
At ABC we help public companies develop a system of governance that enables them to demonstrate flexibility in their strategy, transparency with their operations and accountability to their investors. By creating clear performance measures, we help companies size up their governance system while avoiding dysfunctional elements that slow down decision making-process and reduce flexibility and business might. There are no corporate governance templates that public companies can use. We have extensive research experience in the field as well as the knowledge and experience to develop the right corporate governance solutions

Defining board objectives
This is the starting point. We must clearly define the role and mission of the Board. At this stage we need to discuss key governance objectives that the company’s Board should undertake in accordance with the code. These discussions should be held with senior executives and the Chairman of the Board of Directors. Yet transparency, accountability and performance are the primary board objectives within a sound corporate governance system.

Defining boardroom requirements
After we determine board objectives we will prepare a draft report that recommends an appropriate board structure and composition (executives, non-executives and independent directors) and the required qualifications of board members that will staff each committee. After discussing the report with senior management or any directors we might have reporting obligations, we will prepare our final recommendations on those issues. The ultimate decision for the final guidelines however rests with the company and the board.

Corporate Governance Charter
The Corporate Governance Charter is a written statement of key practices, tools and procedures that address the governance principles of the code, which the board will decide to follow. Our consulting efforts will focus on all the key governance issues with particular emphasis in the areas of independence (guidelines for independence), conflicts of interest and effective oversight. Our advisory services however focus on the latest corporate governance developments and best practices suggested by the Higgs Report. Through a well-developed charter, the company will be in a better position to motivate and attract such independent directors in the future in an era of rapidly increasing governance requirements. Our proposed internal processes will strengthen the board’s oversight function in order to effectively monitor management’s performance and maintain its ethical and legal compliance to high standards. Our approach on these issues is to help the company build long-term shareholder value, guarding the interests of all shareholders and laying the foundations for a truly effective board.

Training and orientation
It is critical that companies help their existing, or newly appointed directors, to familiarize themselves with their duties. Our services here include orientation of committee members in their new duties, which include in-house training on each committee charter. By doing so, we help each committee to not only fulfill its objectives more effectively, but to also help them avoid legal and regulatory traps that their new responsibilities carry.

Board assessment
A performance evaluation that systematically assesses boardroom expertise and identifies current and future gaps is critical. Equally, the right incentives must be put into place to align directors’ interests with those they represent – the company’s stakeholders. An evaluation process that identifies high-quality directors coupled with compensation plans that give the right incentives to top executives and board members are essential parameters in any corporate governance system.

Our consulting team addresses all appraisal needs.
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