Strategy and Leadership
IMD Prof. Michael Wade:
The image of a vortex helps us conceptualize the way digital disruption
impacts firms and industries
IMD Prof. Cossin, Ong Boon Hwee:
Inspiring stewardship and venture valorization investments
to create a positive social impact
Nobody knows where in governance the story begins and where it ends
while the discretionary space given to boards has only been increased
MOVING FORWARD IN A CHAOTIC WORLD
Governance is difficult
for many to interpret. While we are on the right track
in governance, we are still witnessing excesses today
and we need to work hard on best-practice cases to show
that the corporate governance Code is a good guide that
is widely supported. And that is not easy if each
country ultimately chooses its own path in terms of
insight into the Code and in terms of the
reasonableness, fairness, and fiduciary duties in
complying with the Code. In the Netherlands, the Supreme
Court has made a more explicit statement about the
binding nature of the principle-based governance Code.
To comply or explain is legally anchored in the
Netherlands and as a result has direct and indirect
effects. But when the Monitoring Commission had added
long-term value creation compliance to its Code, the
challenge of aligning the Code regionally in the world
has only been increased.
The purpose of the company is to produce solutions triple bottom line and, in the process, to produce profits. However, TBL thinking and material ESG targets require a government to mandate shareholders the use of standards, to execute audits by a 3rd party and to create a fiduciary duty to society. There are hardly any such mandates. Governance, strategy, performance, and prospects must create value. Value creation – and unfortunately for many countries this only contains the short-term maximization of shareholder value - is in the new Code based on entity-centric thinking and the principle that the company is a long-term partnership of stakeholders.
To transition from an agency-principle to an entity-centric governance model, is a revolution in governance. Although a new generation widely supports the latter view there is a long way to go. The coronavirus pandemonium shows our global dependencies and creates a wicked problem in the public multi-purpose multi-value governance models. Aligning all those too early creates a chaotic context and uncertainty as to strategy and the role of the board. As a result, entity-centric thinking in decision-making today to balance all interest, purposes and values within the diversity of cultures and cross-border governance, does not deliver yet enough governance guidance.
Time to go back to school to share a nexus of experience in governance.
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