The Father of Corporate Governance

 

In the last 2 posts I talked about two of the key authors in my area of research. I believe that in order to find out the notion and the main rationality behind any theory or idea we need to know the people who introduced those theories for the first time.

Corporate governance has a root in history. In fact, since the ‘Agency Theory’ of Adam Smith people have become aware of the issue between owners and managers of a company. The first corporate governance code was published in 1992 by a committee managed by Sir Adrian Cadbury. Although it was the first official code for corporate governance, Adrian Cadbury regarded Bob Tricker as the Father of Corporate Governance. In this post I would like to introduce you with Bob, the father of corporate governance. In my view, if you are interested in the concept of corporate governance, it is highly recommended to watch one of Bob’s videos or read his interesting book about it.

Bob Tricker is an expert in corporate governance who wrote the first book to use the title Corporate Governance in 1984. The recent version of his book is still the main textbook for the subject of ‘Corporate Governance’ in UK and Australia. Bob’s academic story is very interesting. After a few years as a financial controller in industry and study at Oxford and Harvard, he was the first professor of information systems at the University of Warwick, then Director of the Oxford Centre for Management Studies and a Research Fellow of Nuffield College, Oxford, where he undertook the research that led to his first book about corporate governance in 1984 as stated before. His original research study on aspects of corporate governance was The Independent Director in 1978. Subsequently, he wrote International Corporate Governance – text, cases and readings in 1994 and many theoretical and practice related papers and cases.

He is also the founder-editor of Corporate Governance: An International Review, and holds Honorary Professorships of The University of Hong Kong. This journal is most recognised journal in corporate governance that I use the articles for my research more than any other journal in the world. It is a peer-reviewed academic journal published six times a year by Wiley-Blackwell. I strongly recommend you take a look at its website here.

There are some other key authors in this area such as Thom Clarke that I mentioned in my previous post or Chris Mallin, Professor of Corporate Governance and Finance, and the Founder and Director of the Centre for Corporate Governance Research, at Birmingham University. However, I believe the way Bob explains this concept is something unique and different. this video is the first part of a set of videos from Bob explaining principles of corporate governance.

Please do not hesitate to leave some feedbacks as I will appreciate any comments from you.

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Integration of Corporate Governance, CSR, and Sustainability

Nowadays, we hear these three terms in almost all business events and conferences. Integration between these concepts could be the key success factor of a company or in a broader image a society. It is a fact that in the past, it was enough for a company to be financially viable in order to continue its business. The story has become completely different now at least in economically developed nations. There are lots of different licenses companies need to obtain and different standards they are required to comply with in order to keep their company going.

I believe that whilst these three concepts are talking about different aspects of business, they aim similar objective, which is having business as a parts of life. we need to accept that we cannot live without business and the current system of global business will kill us soon or late. Therefore, integration between these terms helps the society achieve its goals easier.

Last year I had the chance to meet Thomas Clarke, Professor of Management and Director of the Key University Research Centre for Corporate Governance at the University of Technology, Sydney (UTS). Actually I have a cousin who is a PhD candidate in the school of IT in UTS. Through him I was introduced to this research centre. Thomas is also friend of Professor John Glynn, our dean of Sydney Business School.

Thomas has published several books and dozens of journal articles in the area of international corporate governance and corporate social responsibility. Formerly he was Chair of the Academic Board at UTS, and a member of the University Council. In the United Kingdom he was DBM Professor of Corporate Governance at Leeds Business School, and Professor of Management at China Europe International Business School (CEIBS) in Shanghai, a joint venture of the European Foundation for Management Development (EFMD) and Shanghai Jia Tong University.

His current research is about what he calls ‘Inevitable Integration of Corporate Governance, CSR, and Sustainability’. According to him the balance between economy, society, and ecology should be one of the most important objectives of the states. Before reading his articles, I believed that CSR is a fancy term, which is usually used as a marketing tool for companies. For example, a company grants $100,000 as research fund for further research in a particular environmental issue and then, spends millions of dollars on a marketing campaign showing its responsibility to the environmental issues.

After reading his articles, I was realised that having the proper corporate governance system is the only way companies can insure stakeholders about their accountability. Therefore, corporate governance should be taken into account seriously as it underpins the proper operation of businesses. In fact, without benefiting from a sound system of governance achieving sustainability and CSR goals are almost impossible.

I look forward to hearing your views.

 

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Governing of Governing!! What is Meta-Governance?

There has been growing interest in the past twenty years or so in the potential contribution of new forms of governance to solving coordination problems in and across a wide range of specialized social systems such as the economy, the legal system, the political system, and the health system. This interest is reflected in growing ambiguities about the meaning of governance.

As a researcher in this field, I have seen a lot of different types of governance systems companies implement in order to solve their relationship with shareholders and stakeholders. However, whilst they have similar objectives, the approaches they take in implementation of it vary significantly and as a result the achieved results are different as well. Generally speaking, in my view, design and implementation of new governance structure is very similar to change management practices. In both the way directors implement these strategies is very important in terms of achieving proper results.

Today, I am going to talk about Meta-Governance, one of concept in my area of research that I did not know much about it till last week. Meta-Governance is defined differently by different scholars but the most popular definition is Governing of Governing!

It actually represents the established ethical principles, or ‘norms’, that shape and steer the entire governing process. It is important to note that there are no clearly defined settings within which metagoverning takes place, or particular persons who are responsible for it.

It is interesting to me as this issue, governing the governing process, existed in several articles I have read about implementing effective system of corporate governance. Regardless of the organisational type, they usually faced some difficulties in tailoring a suitable corporate governance structure.

Therefore, to some extent, I guess metagovernance could be an answer to those problems. The fact that ‘norms’ can be established at any level and can then be used to shape the governance process as whole, means metagovernance is part of the both the input and the output of the governing system.

Louis Meuleman, senior fellow at the Centre for Governance and Sustainability of the University of Massachusetts Boston, USA, and research fellow at the Department of Governance Studies at the Free University, Amsterdam, did his Ph.D. in this area.

His Thesis focuses on metagovernance: how to create and manage situationally successful combinations of hierarchical, network and market styles of governance. He concludes that it is not one style, but the optimal governance mixture that works in practice, and that what works where depends among others on national/regional/local cultures and traditions. He published his thesis as a book in 2008, titled ‘Public Management and the Metagovernance of Hierarchies, Networks and Markets’

To conclude, I believe that the introduction era of governance has passed. The importance of corporate governance and its great benefits to both directors and stakeholders have been proved. Therefore, currently we need to define the proper process of implementing these systems rather than justification for the need to have a corporate governance system.

My First Experience in Questionnaire Development

Questionnaire

Last week, as a part of my ‘research methodology’ subject, I developed my first ever questionnaire about my topic. In fact, before, I thought as my research methodology is ‘multiple case study’ I do not need to have quantitative data analysis. Doing some research in this area changed my view. Currently, I am thinking of conducting a survey in order to explore the stakeholders’ perception of governance practices in the organisations I have chosen as case study.

The final version of my questionnaire is available here. I would appreciate if you take a look at it and let me have your comments and advises.

I think having proper knowledge about quantitative data analysis is necessary for all PhD students. Actually, in my view, interpreting the outcomes of quantitative studies is easier and more understandable. Nevertheless, it could be my view as an engineer who is very happy with numbers!

Therefore, I am going to tell you the story of how I developed my first questionnaire. In the first step, I defined the title of the study as:

“A Questionnaire Survey on Employees’ Perception of Governance Practices in the University of Wollongong”

From the topic it can be understood that the population I selected for this questionnaire are UOW staff. The population covered all active academic and general staff, both full-time and casual, that work in October 2013 across all faculties and campuses belong to the University of Wollongong. According to the available information in UOW website, the size of this population is more than 4,000 people. In 2012, UOW had only 2,400 full-time employees. One of the most important parts in designing a questionnaire is selecting the sample. Sample is a subset of the population. In fact, it is the segment of the population that is selected for investigation. For my study, I used a probability sample chosen randomly from the population in order to minimise the sampling error.

After preparing a draft for the questionnaire, I tested it with 3 people. The given feedback was great. Some of the questions were not clear enough and some of them asking similar things!

Thank you for reading this. Please share your experiences if you have conducted any similar surveys during your studies.

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Today I am going to talk about the difference between post graduate research courses such as DBA or PhD and other types of studies from my point of view. The greatest difference I have found so far is the critical style of thinking that PhD students learn to apply. In my case, it changed my view to the world.

In the normal types of study (undergrads or coursework post-grads), students are required to read about the currently available knowledge in their specific areas. In fact, students in those courses do not have enough insight and knowledge in that science discipline. Therefore, they are not capable to critique it as well. In the research studies, it is assumed that the researcher is already familiar with the concept, theories, and implication of a specific discipline and is motivated to examine some undiscovered aspect of those sciences or intended to find answers for remaining questions.

Generally speaking, research students work on some areas that nobody has come up with clear outcomes before or the research student claims that the previous studies are not right. As a research student, I should say that I do not know anything about the outcomes I will conclude my PhD with but the topic is becoming more interesting for me day by day. The reason is that step by step I narrow the scope of my question downer and downer. Therefore, I am now concentrated on the specific issue. Actually, I think that when I started my PhD, I did not know anything about it and I do not know how did I chose this topic with that little amount of knowledge about!

Recently I have heard that some groups claim that doing post graduate studies is not good for all people in the society. At the moment, I am strongly against this view. The reason is that the challenges people experience within research based courses make them more resilient against the difficulties they may have in their ordinary life. Not only regards to the topic they do their research on, but the way they learn in defending their views and supporting their sayings with references and evidences are very useful for their ordinary life.

I have seen a lot of people who easily rely on what they hear in media or from friends without asking them about any reference or evidence. Sometimes people even take drugs or medical advises from their friends without any consultation with doctors that seriously threat their life. I believe that regardless of the scientific knowledge people get through postgraduate research courses, they get wisdom about their style of living and interacting with other individuals. It also enhances people’s ability to communicate and negotiate in their own businesses. As a PhD student I am requested to present my findings a lot of times within my PhD journey. In each presentation I face several critical questions that I should answer with in an academic way. I should also convince my examiners at the end of my research about the way I have conducted my research. I should also justify my findings.

To conclude, I believe that doing research studies help people get trained not only in about the science they do their research on but about their communication with others in their private life as well as business environment.

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“Ridiculous” Projects!! What the Coalition Means?

Recently the Coalition stated that they are intended to revise the research funding system and add more than $100 million to the medical research. It seems good but they actually try to do it through cutting the same amount of money from what they called “ridiculous” projects in the humanities. The report is available here. In this post I would like to discuss this statement from my point of view as a PhD student who is involved in the research in this country.

To start, it is not bad to take a look around ourselves in our room, house or city. We see a lot of things, which are parts of our ordinary life but in fact, people used to live without them in past. Most of our previous descendants did not even feel a need for a specific device, a system or a particular service but when someone else invented it, others became aware of the value.

 The greatest inventions in the past were about technological breakthrough by inventing new machines or systems. However, in the current hectic world we do need innovation in social sciences and humanities as much as other sciences. The coalition statement is understandable to some extent as they may think that having more investment in the medical research will have a positive impact on the society through helping people have longer life with better health condition and recovering better from diseases. Nevertheless, I believe that it is a raw statement, which is not supported with enough evidence. They should define the ridiculous projects first and then try to decrease or increase the funds on them.

 I believe that comparing the outcomes of medical research with other types of research is like comparing apples and oranges. Both of them have some good and bad attributes but cannot be replaced for each other. For instance, my PhD topic is about commercial activities of non-profit organisations. At first, it may seem interesting but not a real issue of people or government but if we take a look at the number of non-profit organisations operate only in Australia and their contribution to the GDP employment rate, we definitely revise our initial assumption. Therefore, if through my research outcomes I help these entities running better in a more sustainable way, the results will help people having a better life as well.

 To conclude, I believe that all aspect of research should be taken seriously in account as each aspect has its own contribution to the people’s life. Political parties should not involve directly in the academic areas while not having enough insight about the real issues in the academic environment. It is their responsibility to set the overall priorities in the country but in academic areas they should respect the experts’ perspectives before making and taking decisions. However, universities and research centres should also articulate the possible outcomes of any type of research they conduct and insure the external parties about the reasons they fund those projects.

 

 

 

 

Agency Theory, The Unsolved Issue!

Today I would like to talk about the very first and for sure the basic theory of corporate governance, which is called as Agency Theory. It was originated in finance and economics. The main concept may go back to 18^th century when Adam Smith raised the issue in the agency relationship. Smith took a very pessimistic view on the separation of ownership and management in a company when argued:

“The directors of companies being managers of other people’s money than their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private co-partnery frequently watch over their own”.

Smith clearly said that this type of relationship would not benefit owners as they do not have the enough power to get involved in the decision-making process. However, he did not mention that what the alternative option for shareholders is. They actually do not have the expertise to run the business by their own knowledge. Therefore, they have to continue the relationship although they know their interest may not fully respected by the directors. His point still exists in the real business world and in my point of view will remain till we keep owners of the business separated from the directors, who run the business in reality.

To be honest, I understood the concept by watching Prof. William Pounds lecture on this topic. A part of his lecture is available below. I would be happy to chat with you guys in order to know your views about this theory and its implication in the current global business environment.

 

Governance differs from management and is about ensuring that those responsible for directing an organization ensure that resources are exclusively devoted to pursuing its defined goals, and account appropriately to shareholders and other stakeholders, who in turn can hold them accountable. From 1980s onward, the concept of corporate governance has developed, expanded and nowadays is the subject of serious discussions. Not-for-Profit organisations are those that do not aim personal gains for the shareholders. They usually deliver free services to the society. Some issue about the governance of this sector has been observed.

Two main gaps have been observed here. The first one is about the capability of the non-profit organisations to enter other business sector and compete with the for-profit sector in order to gain more financial sources. The extent to which, they may enter economical activities have not yet examined. This extent would be different based on the type of not-for-profit organisation. The second gap is about the effectiveness of the existing frameworks of corporate governance in two main cultural contexts. NFPs in Western countries often adopted European model of governance whilst those in Middle-East adopted another model based on the Islamic studies. There are successful NFPs in both places but the effectiveness of the models for governance has not yet examined.