Why corporate governance matters

Executive Education
| The European | 15th January 2019
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From Facebook data breaches to fresh turmoil at Tesla, every day seems to bring in a new crop of corporate scandals. Yet corporate misdemeanors – and the deficient corporate governance frameworks behind them – are nothing new. Back in 2002, the spotlight was on Enron’s fake holdings and off-the-book accounting, and a few years before that, it was on rogue trading at Barings Bank. The list goes on.

If companies were countries, corporate governance would stipulate “the law of the land”, defining an organisation’s codes, customs, practices and policies were in place to ensure accountability and transparency. Just like countries with strong legal systems, robust corporate governance systems would ensure proper risk management and prevent ethical failings and headline-grabbing disasters, like those mentioned earlier.

“In order to ensure their long-term survival, corporations require not only an outstanding senior leadership cadre, but strong governance systems that promote an integrated vision of their goals, objectives and shared values,” explains Jordi Canals, former Dean and Professor of Strategic Management and Economics at IESE Business School.

“When their management bodies and key stakeholders are aligned on these core issues, companies can create mechanisms to design and develop strategic plans, compensation systems and control structures, as well as mechanisms to guarantee the flow of information among the board of directors, top management and shareholders.”

While the pillars of successful corporate governance models haven’t changed much over the years – clear strategic direction, effective risk management, transparency, fairness and discipline, among them – today’s fast-paced business markets, coupled with fallout from recent scandals, have brought other issues to the fore.

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As Pedro Nueno, IESE Emeritus Professor of Entrepreneurship, observes: “Enron set the bar on governance failings back in 2002, yet corporate dysfunction is still alive and well. The structure, purpose and role of corporate boards are changing to correct some of the underlying issues and hopefully avoid problems in the future.”

The author of The 2020 Board: The Future of Company Boards, Professor Nueno sees several significant trends that are changing the composition of corporate boards, which globally are becoming more compact, diverse and gender balanced. As a result of the 2008 financial crisis, corporate boards are also held to higher degrees of responsibility and accountability in the case of any legal or ethical breaches.

Analysing the foundations of effective corporate governance models is one of the topics addressed in IESE’s Advanced Management Programme (AMP), an immersive learning experience aimed at C-level executives from diverse industries, cultures and professional profiles. Typical AMP cohorts reflect around 15 sectors and 20 countries.

Delivered over six months in a flexible modular format, the programme expands participants’ grasp of the most significant trends affecting global leaders, while offering them new perspectives to chart a course of action moving forward. While guided by the IESE faculty, the programme offers ample peer-to-peer learning opportunities to foster networking and exploit the cohort’s rich collective expertise.

As Yolanda Serra, Managing Director of IESE’s International Open Programmes, explains: “The AMP allows senior-level executives to compare and contrast their experiences and expand their awareness of top-of-mind issues, such as the optimal ‘checks and balances’ in corporate governance systems to generate long-term value. This dynamic interaction truly changes how they approach business and leadership challenges.”

Get ahead with IESE

The Advanced Management Programme forms part of IESE’s Executive Education Programme portfolio, ranked number one in the world by the Financial Times for the past four years. The school’s Barcelona campus will welcome the next intake of the Advanced Management Programme in March 2019.

Further information
www.iese.edu/amp

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