Project Management Best Practices: Key Processes and Common Sense ♦ Margo Visitacion
Planning Assumption ♦ RPA-012003-00030 ♦ www.gigaweb.com
© 2003 Giga Information Group, Inc.
Page 3 of 6
into small repeatable phases that can be arranged to best suit the project’s goals. For example, portions
requirements management will be practiced throughout the life of the project in status meetings and in audit
processes. Take the information gathered as part of requirements management (RM) as a guide for
measurement to keep project scope in alignment. There are many things you can do to manage projects;
however, the following are practices that you must perform in order to execute a successful project:
Scope:
•= Know if it “cuts the mustard”: Before undertaking any project, evidence must exist to support its
value. Perform a feasibility study to gauge market potential, enterprise risk/benefit and technological
impact before any activities are started (see IdeaByte, What to Include in a Feasibility Study, Margo
Visitacion).
•= Follow a structured initiation process: Gaining executive understanding and commitment before
undertaking a project, especially one that carries some risk for IT, prevents political jockeying over
priorities and resource commitment. Make sure that the project has a designated business champion,
and gather the necessary business and technological criteria to justify the project to continue adequate
executive support during the life cycle.
Planning:
•= Plan: Comprehensive planning is critical, even with short development cycles. Make project goals
attainable by prioritizing deliverables to keep a team tightly focused on specific issues. From there,
involve the team, stakeholders and sponsors in closely managed sessions to discuss each objective
and clearly explain risks and benefits to understand exposures and the dangers to the project. Doing
this promotes a unified front, because everyone understands how the project is affected by
unnecessary changes, especially if it is understood that more features will follow shortly (see
IdeaByte, Effective Risk Measurement in IT Projects, Jon Erickson).
•= Maintain realism in planning: Determine short-term “must haves” (e.g., one to three months) and
long-term goals (e.g., one to three years). In order to keep to delivery dates, it is often necessary to
deliver a streamlined application or site with enhancements coming in regular scheduled intervals.
Open communication at this point is critical to maintain expectations. Meet weekly with stakeholders
to keep scope creep to a minimum.
•= Assess requirements: Perform stakeholder interviews to ascertain the business and usability
objectives for the project. Hold collective review sessions and prototyping whenever possible to keep
the project team focused on the correct path and manage end-user expectations. Automate the
requirements management process whenever possible to provide a central location for audit trails and
status management.
•= Don’t overload milestones: Keep the milestones actionable, and keep them close together (ideally, no
more than three weeks apart); however, in a project of less than three months in duration, the spacing
can drop to 1½ weeks. This is critical if you are opting for short-term deliverables within a
compressed life cycle. Closely spaced milestones provide opportunity for faster recovery if the
project starts to stray.
•= Publicize your plans: Distribute regular and relevant status information in the most accessible way
possible, for example, e-mail, intranet project pages or an enterprise project management tool. The
more people who are intimately familiar with project requirements and action plans, the less cause
there is for a misstep. Broad access increases the chances of catching a potential problem that a
project manager may have missed.
•= Delegate: A project manager cannot, and should not, do it all. Use the team approach whenever
Project Management Best Practices: Key Processes and Common Sense ♦ Margo Visitacion
Planning Assumption ♦ RPA-012003-00030 ♦ www.gigaweb.com
© 2003 Giga Information Group, Inc.
Page 4 of 6
possible for planning and execution, guided by the project lead. For example, the system architect and
senior programmer manage the architectural and system design phases of the project and report to the
project manager, who focuses on administrative and coordination activities.
•= Manage vendors: This has two meanings. During the planning phase, if standard tools for
communication and execution are not in place, it is critical for the team to implement them. This is
especially true if the team is outsourced or distributed. A single location for critical documentation
and communication is essential. For project execution, designate a single source, whether it is the
project manager or a lead technical person, to be the single point of contact for any vendor issues.
Clarify expectations for reporting, issue management and deliverables and penalties for not meeting
those expectations. Get these agreements in writing.
Execution/Control:
•= Delegate, part two: The small-team approach allows a project team to remain flexible and not get
bogged down in the minutiae. Even if a project is large in scale, the small team works effectively.
Empower project or team leaders to manage tasks within their areas of expertise and work closely to
keep communication open. Keep everyone on task by meeting formally on a weekly basis to review
and measure against milestones, but meet daily on an informal basis to head off possible problems as
quickly as possible.
•= Automate whenever possible: Make automation as accessible as possible. Use requirements
management tools, such as Telelogic Doors or Borland’s Caliber RM, to track changes in scope or
keep additional critical information centrally stored. Project management tools, from vendors such as
Project Central, eLabor.com and Business Engine, allow team members to track time and issues
that keep project managers and team members informed of progress and assist in avoiding
miscommunications regarding objectives.
•= Collaborate, collaborate, collaborate: Team members perform much more effectively if they are in
active communication with each other so that each dependency is clearly understood and managed.
Hold weekly information sessions with the team to discuss issues, and collectively figure out
correction strategies. If the team is scattered, use collaborative tools such as Webex, Placeware or
Centra (see Planning Assumption, Comparing Team Collaboration Vendors on Their Functionality,
Erica Rugullies) to hold meetings and share information. The method is not as important as the action
itself. Keep everyone informed.
•= Use audits: To assess the health of the project, hold biweekly audit sessions, and check the status and
progress of the project. Issues discussed during an audit are actual progress vs. work and cost
estimates, requirements measurement for scope control and overall quality measurements in
productivity. The actual audit process is very flexible; using the project charter as a guide, the team
prepares criteria that measure the entire project, and then uses subsets of those criteria for assessment
with each milestone. Short life-cycle projects can still benefit from audit sessions that ensure that
precious time is not wasted. Keep them short and to the point, and refrain from personalization. Keep
the focus on the project goals (see IdeaByte, Auditing Projects — The Long and Short of It, Margo
Visitacion).
•= Measure productivity: You can’t improve if you don’t measure. Develop standard criteria for
measurement, such as meeting deliverables, defect detection, resource utilization and rework, to find
out where you can optimize or where you need to devote extra attention (see Planning Assumption,
Update: Selecting Metrics and Using Them Effectively, Margo Visitacion).
•= Practice change control: Regardless of project size, if change control is not practiced, the project
won’t meet deliverables and will miss delivery dates. Use software configuration management or
requirements management tools to automate and manage the change process. Establish a chain of
Project Management Best Practices: Key Processes and Common Sense ♦ Margo Visitacion
Planning Assumption ♦ RPA-012003-00030 ♦ www.gigaweb.com
© 2003 Giga Information Group, Inc.
Page 5 of 6
command for approving any scope change for the project. Formality depends on life cycle, but make
sure that at least one business and technical lead is consulted for every change to estimate risk and
duration of the changes (see IdeaByte, There’s More to Change Management Than Change Control,
Margo Visitacion).
•= Test: It is critical to test early and often to ensure that the project is meeting deliverables and is
production-ready. Hold walkthroughs, for example, end-user style demonstrations, peer-to-peer code
inspections, information inspections, etc., at various stages of the project to ensure that the quality is
built-in and that certification time is reduced. Allot time for user acceptance testing and beta testing
whenever possible to minimize postproduction problems. At a minimum, testing should account for
15 percent of the project. If the technology is new or there are large amounts of system integration,
plan for a minimum of 30 percent test time over the life of the project.
•= Design concise implementation procedures: Develop a step-by-step implementation plan that covers
production test procedures, installation requirements as well as a contingency plan for problem
management that includes back-out procedures and production support steps. Accompanying
documentation must include release information: known problems, a high-level test plan (for
production test prior to implementation) and contact information (see IdeaByte, Standardize Internal
Software Implementations for Efficiency and Control, Margo Visitacion).
Closure:
•= Conduct a postmortem: This is the time to hash out any issues that will improve production support
and improve process for the next project. Be sure to collect all project issues that caused any delays or
restructuring of project focus, implementation issues and “morning after” support problems. Like
audits and walkthroughs, these are not forums for personal criticism, but are used to analyze
procedures for improvement.
•= Check temperature: Assess project success at several intervals after implementation to measure how
well the project met expectations. This important metric delivers the foundation for future project
growth. For example, if there are high levels of production support or rework, check the requirements
and design processes; chances are, there was something critical missed during this phase where easy
corrections were possible.
Alternative View
Adopting some practices for larger projects is suitable, but is too time consuming and inefficient for smaller
projects. Borrowing from standard practices is fine, but project managers should not be tied to a rigid set of
practices for unpredictable projects. Procedures should be tailored to the project.
Findings
If an organization has experience in developing various types of projects (but has little to no centralized
project management), it should have a repository of organizational history to serve as a starting place to
design procedures. Analyze current project practices, and perform a gap analysis between successful and
challenged projects. Procedures that worked for previous projects may work for current procedures. Even in
shorter development cycles, the process works by breaking down a successful method into its core objective,
e.g., requirements management worked in previous projects because of strong stakeholder interviews.
Saturday, January 31, 2009
Project Management
Project Phases
Over the years, those involved in managing projects have observed that projects have special characteristics that can be exploited to manage them more effectively. One of those areas somewhat peculiar to the project environment deals with project phases:
*
Projects go through definite and describable phases;
*
Each phase can be brought to some sense of closure as the next phase begins;
*
Phases can be made to result in discrete products or accomplishments (e.g., test results) to provide the starting point for the next phase;
*
The cost for each phase begins small and increase throughout the project, culminating in development, procurement, and the operations and support phases;
* Phase transitions are ideal times to update planning baselines, to conduct high level management reviews, and to evaluate project costs and prospects.
Projects should be structured to take advantage of the natural phases that occur as work progresses. The phases should be defined in terms of schedule and also in terms of specific accomplishments. You should define how you will know when you are finished each phase and what you will have to show for it.
The Project Management Institute defines four major project phases: initiation, planning, execution and closure. One could make the case that almost every project goes through these four phases. Within these phase are smaller gradations. Some methodologies suggest decomposing projects into phases, stages, activities, tasks and steps.
Cost and schedule estimates, plans, requirements, specifications, and so forth, should be updated and evaluated at the end of each phase, sometimes before deciding whether to continue with the project. Large projects are usually structured to have major program reviews at the conclusion of significant project phases. These decision-points in the life of a project are called Major Milestones.
The following illustrates how the concept of project phases is incorporated into a new product development methodology.
This illustrates the linking of major milestone review meetings with the completion of each phase. Milestone decisions are made after conducting a major program review where the project manager presents the approved statement of requirements, acquisition strategy, design progress, test results, updated cost and schedule estimates, and risk assessments, together with a request for authorization to proceed to the next phase.
The early phases will shape the direction for all further efforts on the project. They provide requirements definitions, evaluation of alternative approaches, assessment of maturity of technologies, review of cost, schedule and staffing estimates, and development of specifications.
Milestone completions can be defined in terms of "exit criteria" as well as by calendar dates. Using "event based" schedules rather than date-based schedules ties project phase completions to the successful achievement of predetermined criteria such as completion of testing, demonstration of prototypes, adequacy of technical documentation, or approval of conceptual designs and specifications.
A relatively short-term or technically straight-forward project may have only one approval event, following a proposal or feasibility study. Nevertheless, the project manager should report to customers and interested senior managers at intervals to keep them up to date on project progress and to ensure the continuing soundness of the project direction and requirements.
On small projects, if no formal agreements are written, the project manager should deal with customers and sponsors in an informal yet somewhat contractual way. This means managing expectations and making clear agreements about what will be produced and when.
If project phases take place over many months or even years, it is vital to provide interim deliverables to give the customers and sponsors a sense that work is being accomplished, to provide an opportunity for feedback, and to capture project successes in documented form.
The project planning process should be built around the project life cycle. Particular care should be given to defining the work to be accomplished in each phase. This should include definition of the deliverables to be produced, identifying testing and demonstrations to be completed, preparing updates of cost and schedule estimates, re-assessing risks, and conducting formal technical and management reviews.
If your project runs into an immovable obstacle and progress comes to a complete halt, you may want to declare victory and bring that phase to a close. This can be done by documenting the work already completed, and then writing a report describing the work successfully completed and defining the steps required should project sponsors decide to proceed.
=======================================================================================
14 Key Principles for PM Success
This web-published article by Michael Greer is an excerpt from "Chapter 6: Planning and Managing Human Performance Technology Projects," Handbook of Human Performance Technology, San Francisco, Jossey-Bass, 1999
(Get here by mistake? Return to Michael Greer's Project Management Resources home page.)
1. Project managers must focus on three dimensions of project success. Simply put, project success means completing all project deliverables on time, within budget, and to a level of quality that is acceptable to sponsors and stakeholders. The project manager must keep the team's attention focused on achieving these broad goals.
2. Planning is everything -- and ongoing. On one thing all PM texts and authorities agree: The single most important activity that project managers engage in is planning -- detailed, systematic, team-involved plans are the only foundation for project success. And when real-world events conspire to change the plan, project managers must make a new one to reflect the changes. So planning and replanning must be a way of life for project managers.
3. Project managers must feel, and transmit to their team members, a sense of urgency. Because projects are finite endeavors with limited time, money, and other resources available, they must be kept moving toward completion. Since most team members have lots of other priorities, it's up to the project manager to keep their attention on project deliverables and deadlines. Regular status checks, meetings, and reminders are essential.
4. Successful projects use a time-tested, proven project life cycle. We know what works. Models such as the standard ISD model and others described in this text can help ensure that professional standards and best practices are built into our project plans. Not only do these models typically support quality, they help to minimize rework. So when time or budget pressures seem to encourage taking short cuts, it's up to the project manager to identify and defend the best project life cycle for the job.
5. All project deliverables and all project activities must be visualized and communicated in vivid detail. In short, the project manager and project team must early on create a tangible picture of the finished deliverables in the minds of everyone involved so that all effort is focused in the same direction. Avoid vague descriptions at all costs; spell it out, picture it, prototype it, and make sure everyone agrees to it.
6. Deliverables must evolve gradually, in successive approximations. It simply costs too much and risks too much time spent in rework to jump in with both feet and begin building all project deliverables. Build a little at a time, obtain incremental reviews and approvals, and maintain a controlled evolution.
7. Projects require clear approvals and sign-off by sponsors. Clear approval points, accompanied by formal sign-off by sponsors, SMEs, and other key stakeholders, should be demarcation points in the evolution of project deliverables. It's this simple: anyone who has the power to reject or to demand revision of deliverables after they are complete must be required to examine and approve them as they are being built.
8. Project success is correlated with thorough analyses of the need for project deliverables. Our research has shown that when a project results in deliverables that are designed to meet a thoroughly documented need, then there is a greater likelihood of project success. So managers should insist that there is a documented business need for the project before they agree to consume organizational resources in completing it.
9. Project managers must fight for time to do things right. In our work with project managers we often hear this complaint: "We always seem to have time to do the project over; I just wish we had taken the time to do it right in the first place!" Projects must have available enough time to "do it right the first time." And project managers must fight for this time by demonstrating to sponsors and top managers why it's necessary and how time spent will result in quality deliverables.
10. Project manager responsibility must be matched by equivalent authority. It's not enough to be held responsible for project outcomes; project managers must ask for and obtain enough authority to execute their responsibilities. Specifically, managers must have the authority to acquire and coordinate resources, request and receive SME cooperation, and make appropriate, binding decisions which have an impact on the success of the project.
11. Project sponsors and stakeholders must be active participants, not passive customers. Most project sponsors and stakeholders rightfully demand the authority to approve project deliverables, either wholly or in part. Along with this authority comes the responsibility to be an active participant in the early stages of the project (helping to define deliverables), to complete reviews of interim deliverables in a timely fashion (keeping the project moving), and to help expedite the project manager's access to SMEs, members of the target audience, and essential documentation.
12. Projects typically must be sold, and resold. There are times when the project manager must function as salesperson to maintain the commitment of stakeholders and sponsors. With project plans in hand, project managers may need to periodically remind people about the business need that is being met and that their contributions are essential to help meet this need.
13. Project managers should acquire the best people they can and then do whatever it takes to keep the garbage out of their way. By acquiring the best people -- the most skilled, the most experienced, the best qualified -- the project manager can often compensate for too little time or money or other project constraints. Project managers should serve as an advocate for these valuable team members, helping to protect them from outside interruptions and helping them acquire the tools and working conditions necessary to apply their talents.
14. Top management must actively set priorities. In today's leaner, self-managing organizations, it is not uncommon for project team members to be expected to play active roles on many project teams at the same time. Ultimately, there comes a time when resources are stretched to their limits and there are simply too many projects to be completed successfully. In response, some organizations have established a Project Office comprised of top managers from all departments to act as a clearinghouse for projects and project requests. The Project Office reviews the organization's overall mission and strategies, establishes criteria for project selection and funding, monitors resource workloads, and determines which projects are of high enough priority to be approved. In this way top management provides the leadership necessary to prevent multi-project log jams. (For related information, see my online article What's Project Portfolio Management (PPM) and Why Should Project Managers Care About It?)
=====================================================================================
Over the years, those involved in managing projects have observed that projects have special characteristics that can be exploited to manage them more effectively. One of those areas somewhat peculiar to the project environment deals with project phases:
*
Projects go through definite and describable phases;
*
Each phase can be brought to some sense of closure as the next phase begins;
*
Phases can be made to result in discrete products or accomplishments (e.g., test results) to provide the starting point for the next phase;
*
The cost for each phase begins small and increase throughout the project, culminating in development, procurement, and the operations and support phases;
* Phase transitions are ideal times to update planning baselines, to conduct high level management reviews, and to evaluate project costs and prospects.
Projects should be structured to take advantage of the natural phases that occur as work progresses. The phases should be defined in terms of schedule and also in terms of specific accomplishments. You should define how you will know when you are finished each phase and what you will have to show for it.
The Project Management Institute defines four major project phases: initiation, planning, execution and closure. One could make the case that almost every project goes through these four phases. Within these phase are smaller gradations. Some methodologies suggest decomposing projects into phases, stages, activities, tasks and steps.
Cost and schedule estimates, plans, requirements, specifications, and so forth, should be updated and evaluated at the end of each phase, sometimes before deciding whether to continue with the project. Large projects are usually structured to have major program reviews at the conclusion of significant project phases. These decision-points in the life of a project are called Major Milestones.
The following illustrates how the concept of project phases is incorporated into a new product development methodology.
This illustrates the linking of major milestone review meetings with the completion of each phase. Milestone decisions are made after conducting a major program review where the project manager presents the approved statement of requirements, acquisition strategy, design progress, test results, updated cost and schedule estimates, and risk assessments, together with a request for authorization to proceed to the next phase.
The early phases will shape the direction for all further efforts on the project. They provide requirements definitions, evaluation of alternative approaches, assessment of maturity of technologies, review of cost, schedule and staffing estimates, and development of specifications.
Milestone completions can be defined in terms of "exit criteria" as well as by calendar dates. Using "event based" schedules rather than date-based schedules ties project phase completions to the successful achievement of predetermined criteria such as completion of testing, demonstration of prototypes, adequacy of technical documentation, or approval of conceptual designs and specifications.
A relatively short-term or technically straight-forward project may have only one approval event, following a proposal or feasibility study. Nevertheless, the project manager should report to customers and interested senior managers at intervals to keep them up to date on project progress and to ensure the continuing soundness of the project direction and requirements.
On small projects, if no formal agreements are written, the project manager should deal with customers and sponsors in an informal yet somewhat contractual way. This means managing expectations and making clear agreements about what will be produced and when.
If project phases take place over many months or even years, it is vital to provide interim deliverables to give the customers and sponsors a sense that work is being accomplished, to provide an opportunity for feedback, and to capture project successes in documented form.
The project planning process should be built around the project life cycle. Particular care should be given to defining the work to be accomplished in each phase. This should include definition of the deliverables to be produced, identifying testing and demonstrations to be completed, preparing updates of cost and schedule estimates, re-assessing risks, and conducting formal technical and management reviews.
If your project runs into an immovable obstacle and progress comes to a complete halt, you may want to declare victory and bring that phase to a close. This can be done by documenting the work already completed, and then writing a report describing the work successfully completed and defining the steps required should project sponsors decide to proceed.
=======================================================================================
14 Key Principles for PM Success
This web-published article by Michael Greer is an excerpt from "Chapter 6: Planning and Managing Human Performance Technology Projects," Handbook of Human Performance Technology, San Francisco, Jossey-Bass, 1999
(Get here by mistake? Return to Michael Greer's Project Management Resources home page.)
1. Project managers must focus on three dimensions of project success. Simply put, project success means completing all project deliverables on time, within budget, and to a level of quality that is acceptable to sponsors and stakeholders. The project manager must keep the team's attention focused on achieving these broad goals.
2. Planning is everything -- and ongoing. On one thing all PM texts and authorities agree: The single most important activity that project managers engage in is planning -- detailed, systematic, team-involved plans are the only foundation for project success. And when real-world events conspire to change the plan, project managers must make a new one to reflect the changes. So planning and replanning must be a way of life for project managers.
3. Project managers must feel, and transmit to their team members, a sense of urgency. Because projects are finite endeavors with limited time, money, and other resources available, they must be kept moving toward completion. Since most team members have lots of other priorities, it's up to the project manager to keep their attention on project deliverables and deadlines. Regular status checks, meetings, and reminders are essential.
4. Successful projects use a time-tested, proven project life cycle. We know what works. Models such as the standard ISD model and others described in this text can help ensure that professional standards and best practices are built into our project plans. Not only do these models typically support quality, they help to minimize rework. So when time or budget pressures seem to encourage taking short cuts, it's up to the project manager to identify and defend the best project life cycle for the job.
5. All project deliverables and all project activities must be visualized and communicated in vivid detail. In short, the project manager and project team must early on create a tangible picture of the finished deliverables in the minds of everyone involved so that all effort is focused in the same direction. Avoid vague descriptions at all costs; spell it out, picture it, prototype it, and make sure everyone agrees to it.
6. Deliverables must evolve gradually, in successive approximations. It simply costs too much and risks too much time spent in rework to jump in with both feet and begin building all project deliverables. Build a little at a time, obtain incremental reviews and approvals, and maintain a controlled evolution.
7. Projects require clear approvals and sign-off by sponsors. Clear approval points, accompanied by formal sign-off by sponsors, SMEs, and other key stakeholders, should be demarcation points in the evolution of project deliverables. It's this simple: anyone who has the power to reject or to demand revision of deliverables after they are complete must be required to examine and approve them as they are being built.
8. Project success is correlated with thorough analyses of the need for project deliverables. Our research has shown that when a project results in deliverables that are designed to meet a thoroughly documented need, then there is a greater likelihood of project success. So managers should insist that there is a documented business need for the project before they agree to consume organizational resources in completing it.
9. Project managers must fight for time to do things right. In our work with project managers we often hear this complaint: "We always seem to have time to do the project over; I just wish we had taken the time to do it right in the first place!" Projects must have available enough time to "do it right the first time." And project managers must fight for this time by demonstrating to sponsors and top managers why it's necessary and how time spent will result in quality deliverables.
10. Project manager responsibility must be matched by equivalent authority. It's not enough to be held responsible for project outcomes; project managers must ask for and obtain enough authority to execute their responsibilities. Specifically, managers must have the authority to acquire and coordinate resources, request and receive SME cooperation, and make appropriate, binding decisions which have an impact on the success of the project.
11. Project sponsors and stakeholders must be active participants, not passive customers. Most project sponsors and stakeholders rightfully demand the authority to approve project deliverables, either wholly or in part. Along with this authority comes the responsibility to be an active participant in the early stages of the project (helping to define deliverables), to complete reviews of interim deliverables in a timely fashion (keeping the project moving), and to help expedite the project manager's access to SMEs, members of the target audience, and essential documentation.
12. Projects typically must be sold, and resold. There are times when the project manager must function as salesperson to maintain the commitment of stakeholders and sponsors. With project plans in hand, project managers may need to periodically remind people about the business need that is being met and that their contributions are essential to help meet this need.
13. Project managers should acquire the best people they can and then do whatever it takes to keep the garbage out of their way. By acquiring the best people -- the most skilled, the most experienced, the best qualified -- the project manager can often compensate for too little time or money or other project constraints. Project managers should serve as an advocate for these valuable team members, helping to protect them from outside interruptions and helping them acquire the tools and working conditions necessary to apply their talents.
14. Top management must actively set priorities. In today's leaner, self-managing organizations, it is not uncommon for project team members to be expected to play active roles on many project teams at the same time. Ultimately, there comes a time when resources are stretched to their limits and there are simply too many projects to be completed successfully. In response, some organizations have established a Project Office comprised of top managers from all departments to act as a clearinghouse for projects and project requests. The Project Office reviews the organization's overall mission and strategies, establishes criteria for project selection and funding, monitors resource workloads, and determines which projects are of high enough priority to be approved. In this way top management provides the leadership necessary to prevent multi-project log jams. (For related information, see my online article What's Project Portfolio Management (PPM) and Why Should Project Managers Care About It?)
=====================================================================================
Technology
to think flexible,practical & for the people
Technology makes life affordable,convenient ,Easy to Reach
Technology makes life affordable,convenient ,Easy to Reach
Friday, January 30, 2009
Time Management
Effective Time Management
Date: 18 FEB 2009 Venue: JW Marriott, Mumbai
Date: 19 FEB 2009 Venue: Courtyard Marriott, Chennai
"Until we can manage time, we can manage nothing else." Peter F.Drucker
Time is the scarcest resource, unless it is managed, nothing else can be managed. Time unlike other resources cannot be saved for a rainy day or accumulated. In spite of time being so precious, most of us waste nothing so quite thoughtlessly as time.
Although all people have different talents, skills and personalities, each has exactly the same amount of time.
Objectives
*
Planning
*
Organizing
*
Prioritizing
*
Scheduling
*
Usage Of Planning Tools
Course Contents
(9:30 AM-5:15PM)
*
Finding time stealers
*
Categories of time use!
*
Planning and priority setting
*
Delegation
*
Goal-setting
*
Procrastinations / Interruptions / Mental blocks.
*
Saying "No".
*
Pareto's principle
*
Parkinson's law
*
Breaking the habit of procrastination
*
Distinguish between tension-relieving and result-achieving activities
*
Personal time value and use of Prime time
*
Making best use of your odd moments
*
Using time to produce results
Pay Offs: Upon completion of this programme participants will be able to:
*
Take decisions and delegate effectively
*
Differentiate between important and urgent tasks
*
Plan more effectively.
*
Manage stress more effectively by meeting deadlines.
Registration Fee
Please send an email to register@princetonacademy.in with name of participant, company,contact details and cheque no. Registration fee is Rs. 6,300 + 12.36 % Service Tax (Service Tax No- AAECP5617MST001) per participant which includes lunch, tea, course material etc. Cheque should be drawn in favour of "Princeton Academy Mumbai II Pvt. Ltd." payable at Mumbai.
Faculty
Mr. Rajiv Kumar Luv
*
Since 1991, he has been working as a Corporate Training Consultant in the area of Soft Skills. His forte being "Personality Development."
*
He has trained over 25,000 people from all walks of life in the past 16 years.
*
He is...a great speaker, positive, confident, compassionate, tolerant, committed, and making a difference in the lives of people is his mission.
*
His workshops are very effective because of their simple structure and lucid manner in which they are facilitated.
*
His workshops are relevant & useful & the learning process stimulating & interesting.
*
He can
o
Inspire and motivate people
o
Elicit high levels of involvement in work
o
Help people eliminate dysfunctional behaviors , beliefs, habits
o
Help people increase efficiency, effectiveness, and excellence
o
Trigger their Creativity to solve problems
Princeton Academy Mumbai II
502 Shalimar Morya Park, Andheri Link Road, Andheri West, Mumbai- 400053.
Tel- 022-66976892, 67256200. Delhi- 9312715500. Fax- 26733060.
email-register@princetonacademy.in
--
Pareto's principle
The 80-20 Rule
"vital few and trivial many"
What It Means
The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.
You know 20 percent of your stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.
How It Can Help You
The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn't going to get done, make sure it's not part of that 20 percent.
There is a management theory floating around at the moment that proposes to interpret Pareto's Principle in such a way as to produce what is called Superstar Management. The theory's supporters claim that since 20 percent of your people produce 80 percent of your results you should focus your limited time on managing only that 20 percent, the superstars. The theory is flawed, as we are discussing here because it overlooks the fact that 80 percent of your time should be spent doing what is really important. Helping the good become better is a better use of your time than helping the great become terrific. Apply the Pareto Principle to all you do, but use it wisely.
Manage This Issue
Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important. Don't just "work smart", work smart on the right things.
====================================================================================
Parkinson's Law (1957).
The simple definition: "work expands to fill the time available" does not fully explore the concerns expressed in C. Northcote Parkinson's Book. An example is provided of two people writing a postcard. An elderly retired person may consume an entire day for this task: carefully choosing the card, contemplating the word choice, followed by a long, leisurely walk to the post office. A busy person will pick the first appropriate card, write it and mail it on the way home.
Many other examples were given by Parkinson. One of his most alarming relates to bureaucracies. For example, most of the population assumes that a growing civil service reflects a growing workload. Parkinson believes otherwise and provides this argument:
Civil servant A is overworked (this may be illusory or the result of reaching their level of incompetence). The worker has only a few options; he may leave, share his work with colleagues at the same level or appoint two juniors. It is important to note that he has to appoint two juniors. A single subordinate would very quickly assume almost equal status with A in their own minds as well as others and would therefore be a rival. This is also the reason against sharing the work with someone on the same level. So now, assuming A didn't leave, we have A and two subordinates B and C. Very soon either B or C will complain about being overworked and two more subordinates to them will be appointed. Another two will have to be appointed to keep the other original subordinate happy.
Seven are now doing the work of one. All will be busy shuffling paperwork, holding meetings, and passing e-mails amongst themselves, correcting grammar, passing decisions down the line and back up again, and plotting or defending themselves from coworker backstabbing. Person A is now reduced to management, something he may not be happy with, in fact he may have had his level of incompetence enforced on him.
Management's Role
It is definitely worthwhile to consider the possibility that real world occurences of Parkinson's Law and the citing thereof by managers who wish to justify their Theory X management style and "aggressive goal setting" scheduling technique may simply be a manifestation of the Rosenthal Effect, or "Self-Fulfilling Prophecy". For example, say the manager was Peter Principle'd into their current management role, and is not particularly skilled at hiring, scheduling, or communicating. One of the repercussions of these inabilities might be work expanding to fill the time available with these "substandard staff" (justifying his role as their leader) and the only way to keep this effect in check would be active micromanagement (rather than self-improvement).
C. Northcote Parkinson, Parkinson's Law or The Pursuit of Progress (London, 1958)
Parkinson's Law
C. Northcote Parkinson
C. Northcote Parkinson is Raffles Professor of History at the University of
Singapore. This article first appeared in The Economist in November
1955.
It is a commonplace observation that work expands so as to fill the time available for
its completion. Thus, an elderly lady of leisure can spend an entire day in writing and
dispatching a postcard to her niece at Bognor Regis. An hour will be spent in finding the
postcard, another in hunting for spectacles, half-an-hour in a search for the address, an
hour and a quarter in composition, and twenty minutes in deciding whether or not to take
an umbrella when going to the pillar-box in the next street. The total effort which would
occupy a busy man for three minutes all told may in this fashion leave another person
prostrate after a day of doubt, anxiety and toil.
Granted that work (and especially paper work) is thus elastic in its demands on time,
it is manifest that there need be little or no relationship between the work to be done and
the size of the staff to which it may be assigned. Before the discovery of a new scientific
law-herewith presented to the public for the first time, and to be called Parkinson's Law1
- there has, however, been insufficient recognition of the implication of this fact in the
field of public administration. Politicians and taxpayers have assumed (with occasional
phases of doubt) that a rising total in the number of civil servants must reflect a growing
volume of work to be done. Cynics, in questioning this belief, have imagined that the
multiplication of officials must have left some of them idle or all of them able to work for
shorter hours. But this is a matter in which faith and doubt seem equally misplaced. The
fact is that the number of the officials and the quantity of the work to be done are not
related to each other at all. The rise in the total of those employed is governed by
Parkinson's Law, and would be much the same whether the volume of the work were to
increase, diminish or even disappear. The importance of Parkinson's Law lies in the fact
that it is a law of growth based upon an analysis of the factors by which the growth is
controlled.
The validity of this recently discovered law must rely mainly on statistical proofs,
which will follow. Of more interest to the general reader is the explanation of the factors
that underlie the general tendency to which this law gives definition. Omitting
technicalities (which are numerous) we may distinguish, at the outset, two motive forces.
They can be represented for the present purpose by two almost axiomatic statements,
thus:
Factor I. An official wants to multiply subordinates, not rivals and
Factor II. Officials make work for each other. We must now examine
these motive forces in turn.
THE LAW OF MULTIPLICATION OF SUBORDINATES
To comprehend Factor I, we must picture a civil servant called A who finds himself
overworked. Whether this overwork is real or imaginary is immaterial; but we should
observe, in passing, that A's sensation (or illusion) might easily result from his own
decreasing energy-a normal symptom of middle age. For this real or imagined overwork
there are, broadly speaking, three possible remedies:
(1) He may resign.
- 2 -
(2) He may ask to halve the work with a colleague called B.
(3) He may demand the assistance of two subordinates to be called C and D.
There is probably no instance in civil service history of A choosing any but the third
alternative. By resignation he would lose his pension rights. By having B appointed, on
his own level in the hierarchy, he would merely bring in a rival for promotion to W's
vacancy when W (at long last) retires. So A would rather have C and D, junior
men, below him. They will add to his consequence; and, by dividing the work into two
categories, as between C and D, he will have the merit of being the only man who
comprehends them both.
It is essential to realize, at this point, that C and D are, as it were, inseparable. To
appoint C alone would have been impossible. Why? Because C, if by himself, would
divide the work with A and so assume almost the equal status which has been refused in
the first instance to B; a status the more emphasized if C is A's only possible successor.
Subordinates must thus number two or more, each being kept in order by fear of the
other's promotion. When C complains in turn of being overworked (as he certainly will)
A will, with the concurrence of C, advise the appointment only by advising the
appointment of two more assistants to help D, whose position is much the same. With
this recruitment of E, F, G and H, the promotion of A is now practically certain.
THE LAW OF MULTIPLICATION OF WORK
Seven officials are now doing what one did before. This is where Factor II comes into
operation. For these seven make so much work for each other that all are fully occupied
and A is working harder than ever. An incoming document may well come before each of
them in turn. Official E decides that it falls within the province of F, who places a draft
reply before C, who amends it drastically before consulting D, who asks G to deal with it.
But G goes on leave at this point, handing the file over to H, who drafts a minute, which
is signed by D and returned to C, who revises his draft accordingly and lays the new
version before A.
What does A do? He would have every excuse for signing the thing unread, for he has
many other matters on his mind. Knowing now that he is to succeed W next year, he has
to decide whether C or D should succeed to his own office. He had to agree to G going on
leave, although not yet strictly entitled to it. He is worried whether H should not have
gone instead, for reasons of health. He has looked pale recently - partly but not solely
because of his domestic troubles. Then there is the business of F's special increment of
salary for the period of the conference, and E's application for transfer to the Ministry of
Pensions. A has heard that D is in love with a married typist and that G and F are no
longer on speaking terms-no one seems to know why. So A might be tempted to sign C's
draft and have done with it.
But A is a conscientious man. Beset as he is with problems created by his colleagues
for themselves and for him-created by the mere fact of these officials' existence-he is not
the man to shirk his duty. He reads through the draft with care, deletes the fussy
paragraphs added by C and H and restores the thing back to the form preferred in the first
instance by the able (if quarrelsome) F. He corrects the English-none of these young men
can write grammatically-and finally produces the same reply he would have written if
officials C to H had never been born. Far more people have taken far longer to produce
the same result. No one has been idle. All have done their best. And it is late in the
evening before A finally quits his office and begins the return journey to Ealing. The last
of the office lights are being turned off in the gathering dusk, which marks the end of
another day's administrative toil. Among the last to leave, A reflects, with bowed
- 3 -
shoulders and a wry smile that late hours, like gray hairs, are among the penalties of
success.
THE SCIENTIFIC PROOFS
From this description of the factors at work the student of political science will
recognize that administrators are more or less bound to multiply. Nothing has yet been
said, however, about the period of time likely to elapse between the date of A's
appointment and the date from which we can calculate the pensionable service of H. Vast
masses of statistical evidence have been collected and it is from a study of this data that
Parkinson's Law has been deduced. Space will not allow of detailed analysis, but research
began in the British Navy Estimates. These were chosen because the Admiralty's
responsibilities are more easily measurable than those of (say) the Board of Trade.
The accompanying table is derived from Admiralty statistics for 1914 and 1928. The
criticism voiced at the time centered on the comparison between the sharp fall in numbers
of those available for fighting and the sharp rise in those available only for
administration, the creation, it was said, of "a magnificent Navy on land." But that
comparison is not to the present purpose. What we have to note is that the 2,000
Admiralty officials of 1914 had become the 3,569 of 1928; and that this growth was
unrelated to any possible increase in their work. The Navy during that period had
diminished, in point of fact, by a third in men and two-thirds in ships. Nor, from 1922
onwards, was its strength even expected to increase, for its total of ships (unlike its total
of officials) was limited by the Washington Naval Agreement of that year. Yet in these
circumstances we had a 78.45 percent increase in Admiralty officials over a period of
fourteen years; an average increase of 5.6 percent a year on the earlier total. In fact, as we
shall see, the rate of increase was not as regular as that. All we have to consider, at this
stage, is the percentage rise over a given period.
ADMIRALTY STATISTICS
Percentage
1914 1928 increase or decrease
Capital ships in commission 62 20 -67.74
Officers and men in Royal Navy 146,000 100,000 -31.50
Dockyard workers 57,000 62,439 + 9.54
Dockyard officials and clerks 3,249 4,558 +40.28
Admiralty officials 2,000 3,569 +78.45
Can this rise in the total number of civil servants be accounted for except on the
assumption that such a total must always rise by a law governing its growth? It might be
urged, at this point, that the period under discussion was one of rapid development in
naval technique. The use of the flying machine was no longer confined to the eccentric.
Submarines were tolerated if not approved. Engineer officers were beginning to be
regarded as almost human. In so revolutionary an age we might expect the storekeepers
would have more elaborate inventories to compile. We might not wonder to see more
draughtsmen on the payroll, more designers, more technicians and scientists. But these,
the dockyard officials, increased only by 40 percent in number, while the men of
Whitehall increased by nearly 80 percent. For every new foreman or electrical engineer at
Portsmouth there had to be two or more clerks at Charing Cross. From this we might be
tempted to conclude, provisionally, that the rate of increase in administrative staff is
likely to be double that of the technical staff at a time when the actually useful strength
(in this case, of seamen) is being reduced by 31.5 percent. It has been proved, however,
statistically, that this last percentage is irrelevant. The Officials would have multiplied at
the same rate had there been no actual seamen at all.
- 4 -
It would be interesting to follow the further progress by which the 8,118 Admiralty
staff of 1935 came to number 33,788 by 1954. But the staff of the Colonial Office affords
a better field of study during a period of Imperial decline. The relevant statistics are set
down below. Before showing what the rate of increase is, we must observe that the extent
of this department's responsibilities was far from constant during these twenty years. The
colonial territories were not much altered in area or population between1935 and 1939.
They were considerably diminished by 1943, certain areas being in enemy hands. They
were increased again in 1947, but have since then shrunk steadily from year to year as
successive colonies achieve self-government.
COLONIAL OFFICE OFFICIALS
1935 1939 1943 1947 1954
372 450 817 1,139 1,661
It would be rational, prior to the discovery of Parkinson's Law, to suppose that these
changes in the scope of Empire would be reflected in the size of its central
administration. But a glance at the figures shows that the staff totals represent automatic
stages in an inevitable increase. And this increase, while related to that observed in other
departments, has nothing to do with the size - or even the existence - of the Empire. What
are the percentages of increase? We must ignore, for this purpose, the rapid increase in
staff, which accompanied the diminution of responsibility during World War II. We
should note rather the peacetime rates of increase over 5.24 percent between 1935 and
1939, and 6.55 percent between 1947 and 1954. This gives an average increase of 5.89
percent each year, a percentage markedly similar to that already found in the Admiralty
staff increase between 1914 and 1928.
Further and detailed statistical analysis of departmental staffs would be inappropriate
in such an article as this. It is hoped, however, to reach a tentative conclusion regarding
the time likely to elapse between a given official's first appointment and the later
appointment of his two or more assistants. Dealing with the problem of pure staff
accumulation, all the researches so far completed point to an average increase of about 5
4' percent per year. This fact established, it now becomes possible to state Parkinson's
Law in mathematical form, thus:
In any public administrative department not actually at war a staff increase may be
expected to follow this formula:
x = 2km + p
n
where k is the number of staff seeking promotion through the appointment of
subordinates; p represents the difference between the ages of appointment and retirement;
m is the number of man hours devoted to answering minutes within the department; and n
is the number of effective units being administered. Then x will be the number of new
staff required each year.
Mathematicians will, of course, realize that to find the percentage increase they must
multiply x by 100 and divide by the total of the previous year, thus:
100(2km + p)
yn
%
- 5 -
where y represents the total original staff. And this figure will invariably prove to be
between 5.17 percent and 6.56 percent, irrespective of any variation in the amount of
work (if any) to be done.
The discovery of this formula and of the general principles upon which it is based
has, of course, no emotive value. No attempt has been made to inquire whether
departments ought to grow in size. Those who hold that this growth is essential to gain
full employment are fully entitled to their opinion. Those who doubt the stability of an
economy based upon reading each other's minutes are equally entitled to theirs.
Parkinson's Law is a purely scientific discovery, inapplicable except in theory to the
politics of the day. It is not the business of the
Date: 18 FEB 2009 Venue: JW Marriott, Mumbai
Date: 19 FEB 2009 Venue: Courtyard Marriott, Chennai
"Until we can manage time, we can manage nothing else." Peter F.Drucker
Time is the scarcest resource, unless it is managed, nothing else can be managed. Time unlike other resources cannot be saved for a rainy day or accumulated. In spite of time being so precious, most of us waste nothing so quite thoughtlessly as time.
Although all people have different talents, skills and personalities, each has exactly the same amount of time.
Objectives
*
Planning
*
Organizing
*
Prioritizing
*
Scheduling
*
Usage Of Planning Tools
Course Contents
(9:30 AM-5:15PM)
*
Finding time stealers
*
Categories of time use!
*
Planning and priority setting
*
Delegation
*
Goal-setting
*
Procrastinations / Interruptions / Mental blocks.
*
Saying "No".
*
Pareto's principle
*
Parkinson's law
*
Breaking the habit of procrastination
*
Distinguish between tension-relieving and result-achieving activities
*
Personal time value and use of Prime time
*
Making best use of your odd moments
*
Using time to produce results
Pay Offs: Upon completion of this programme participants will be able to:
*
Take decisions and delegate effectively
*
Differentiate between important and urgent tasks
*
Plan more effectively.
*
Manage stress more effectively by meeting deadlines.
Registration Fee
Please send an email to register@princetonacademy.in with name of participant, company,contact details and cheque no. Registration fee is Rs. 6,300 + 12.36 % Service Tax (Service Tax No- AAECP5617MST001) per participant which includes lunch, tea, course material etc. Cheque should be drawn in favour of "Princeton Academy Mumbai II Pvt. Ltd." payable at Mumbai.
Faculty
Mr. Rajiv Kumar Luv
*
Since 1991, he has been working as a Corporate Training Consultant in the area of Soft Skills. His forte being "Personality Development."
*
He has trained over 25,000 people from all walks of life in the past 16 years.
*
He is...a great speaker, positive, confident, compassionate, tolerant, committed, and making a difference in the lives of people is his mission.
*
His workshops are very effective because of their simple structure and lucid manner in which they are facilitated.
*
His workshops are relevant & useful & the learning process stimulating & interesting.
*
He can
o
Inspire and motivate people
o
Elicit high levels of involvement in work
o
Help people eliminate dysfunctional behaviors , beliefs, habits
o
Help people increase efficiency, effectiveness, and excellence
o
Trigger their Creativity to solve problems
Princeton Academy Mumbai II
502 Shalimar Morya Park, Andheri Link Road, Andheri West, Mumbai- 400053.
Tel- 022-66976892, 67256200. Delhi- 9312715500. Fax- 26733060.
email-register@princetonacademy.in
--
Pareto's principle
The 80-20 Rule
"vital few and trivial many"
What It Means
The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.
You know 20 percent of your stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.
How It Can Help You
The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn't going to get done, make sure it's not part of that 20 percent.
There is a management theory floating around at the moment that proposes to interpret Pareto's Principle in such a way as to produce what is called Superstar Management. The theory's supporters claim that since 20 percent of your people produce 80 percent of your results you should focus your limited time on managing only that 20 percent, the superstars. The theory is flawed, as we are discussing here because it overlooks the fact that 80 percent of your time should be spent doing what is really important. Helping the good become better is a better use of your time than helping the great become terrific. Apply the Pareto Principle to all you do, but use it wisely.
Manage This Issue
Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important. Don't just "work smart", work smart on the right things.
====================================================================================
Parkinson's Law (1957).
The simple definition: "work expands to fill the time available" does not fully explore the concerns expressed in C. Northcote Parkinson's Book. An example is provided of two people writing a postcard. An elderly retired person may consume an entire day for this task: carefully choosing the card, contemplating the word choice, followed by a long, leisurely walk to the post office. A busy person will pick the first appropriate card, write it and mail it on the way home.
Many other examples were given by Parkinson. One of his most alarming relates to bureaucracies. For example, most of the population assumes that a growing civil service reflects a growing workload. Parkinson believes otherwise and provides this argument:
Civil servant A is overworked (this may be illusory or the result of reaching their level of incompetence). The worker has only a few options; he may leave, share his work with colleagues at the same level or appoint two juniors. It is important to note that he has to appoint two juniors. A single subordinate would very quickly assume almost equal status with A in their own minds as well as others and would therefore be a rival. This is also the reason against sharing the work with someone on the same level. So now, assuming A didn't leave, we have A and two subordinates B and C. Very soon either B or C will complain about being overworked and two more subordinates to them will be appointed. Another two will have to be appointed to keep the other original subordinate happy.
Seven are now doing the work of one. All will be busy shuffling paperwork, holding meetings, and passing e-mails amongst themselves, correcting grammar, passing decisions down the line and back up again, and plotting or defending themselves from coworker backstabbing. Person A is now reduced to management, something he may not be happy with, in fact he may have had his level of incompetence enforced on him.
Management's Role
It is definitely worthwhile to consider the possibility that real world occurences of Parkinson's Law and the citing thereof by managers who wish to justify their Theory X management style and "aggressive goal setting" scheduling technique may simply be a manifestation of the Rosenthal Effect, or "Self-Fulfilling Prophecy". For example, say the manager was Peter Principle'd into their current management role, and is not particularly skilled at hiring, scheduling, or communicating. One of the repercussions of these inabilities might be work expanding to fill the time available with these "substandard staff" (justifying his role as their leader) and the only way to keep this effect in check would be active micromanagement (rather than self-improvement).
C. Northcote Parkinson, Parkinson's Law or The Pursuit of Progress (London, 1958)
Parkinson's Law
C. Northcote Parkinson
C. Northcote Parkinson is Raffles Professor of History at the University of
Singapore. This article first appeared in The Economist in November
1955.
It is a commonplace observation that work expands so as to fill the time available for
its completion. Thus, an elderly lady of leisure can spend an entire day in writing and
dispatching a postcard to her niece at Bognor Regis. An hour will be spent in finding the
postcard, another in hunting for spectacles, half-an-hour in a search for the address, an
hour and a quarter in composition, and twenty minutes in deciding whether or not to take
an umbrella when going to the pillar-box in the next street. The total effort which would
occupy a busy man for three minutes all told may in this fashion leave another person
prostrate after a day of doubt, anxiety and toil.
Granted that work (and especially paper work) is thus elastic in its demands on time,
it is manifest that there need be little or no relationship between the work to be done and
the size of the staff to which it may be assigned. Before the discovery of a new scientific
law-herewith presented to the public for the first time, and to be called Parkinson's Law1
- there has, however, been insufficient recognition of the implication of this fact in the
field of public administration. Politicians and taxpayers have assumed (with occasional
phases of doubt) that a rising total in the number of civil servants must reflect a growing
volume of work to be done. Cynics, in questioning this belief, have imagined that the
multiplication of officials must have left some of them idle or all of them able to work for
shorter hours. But this is a matter in which faith and doubt seem equally misplaced. The
fact is that the number of the officials and the quantity of the work to be done are not
related to each other at all. The rise in the total of those employed is governed by
Parkinson's Law, and would be much the same whether the volume of the work were to
increase, diminish or even disappear. The importance of Parkinson's Law lies in the fact
that it is a law of growth based upon an analysis of the factors by which the growth is
controlled.
The validity of this recently discovered law must rely mainly on statistical proofs,
which will follow. Of more interest to the general reader is the explanation of the factors
that underlie the general tendency to which this law gives definition. Omitting
technicalities (which are numerous) we may distinguish, at the outset, two motive forces.
They can be represented for the present purpose by two almost axiomatic statements,
thus:
Factor I. An official wants to multiply subordinates, not rivals and
Factor II. Officials make work for each other. We must now examine
these motive forces in turn.
THE LAW OF MULTIPLICATION OF SUBORDINATES
To comprehend Factor I, we must picture a civil servant called A who finds himself
overworked. Whether this overwork is real or imaginary is immaterial; but we should
observe, in passing, that A's sensation (or illusion) might easily result from his own
decreasing energy-a normal symptom of middle age. For this real or imagined overwork
there are, broadly speaking, three possible remedies:
(1) He may resign.
- 2 -
(2) He may ask to halve the work with a colleague called B.
(3) He may demand the assistance of two subordinates to be called C and D.
There is probably no instance in civil service history of A choosing any but the third
alternative. By resignation he would lose his pension rights. By having B appointed, on
his own level in the hierarchy, he would merely bring in a rival for promotion to W's
vacancy when W (at long last) retires. So A would rather have C and D, junior
men, below him. They will add to his consequence; and, by dividing the work into two
categories, as between C and D, he will have the merit of being the only man who
comprehends them both.
It is essential to realize, at this point, that C and D are, as it were, inseparable. To
appoint C alone would have been impossible. Why? Because C, if by himself, would
divide the work with A and so assume almost the equal status which has been refused in
the first instance to B; a status the more emphasized if C is A's only possible successor.
Subordinates must thus number two or more, each being kept in order by fear of the
other's promotion. When C complains in turn of being overworked (as he certainly will)
A will, with the concurrence of C, advise the appointment only by advising the
appointment of two more assistants to help D, whose position is much the same. With
this recruitment of E, F, G and H, the promotion of A is now practically certain.
THE LAW OF MULTIPLICATION OF WORK
Seven officials are now doing what one did before. This is where Factor II comes into
operation. For these seven make so much work for each other that all are fully occupied
and A is working harder than ever. An incoming document may well come before each of
them in turn. Official E decides that it falls within the province of F, who places a draft
reply before C, who amends it drastically before consulting D, who asks G to deal with it.
But G goes on leave at this point, handing the file over to H, who drafts a minute, which
is signed by D and returned to C, who revises his draft accordingly and lays the new
version before A.
What does A do? He would have every excuse for signing the thing unread, for he has
many other matters on his mind. Knowing now that he is to succeed W next year, he has
to decide whether C or D should succeed to his own office. He had to agree to G going on
leave, although not yet strictly entitled to it. He is worried whether H should not have
gone instead, for reasons of health. He has looked pale recently - partly but not solely
because of his domestic troubles. Then there is the business of F's special increment of
salary for the period of the conference, and E's application for transfer to the Ministry of
Pensions. A has heard that D is in love with a married typist and that G and F are no
longer on speaking terms-no one seems to know why. So A might be tempted to sign C's
draft and have done with it.
But A is a conscientious man. Beset as he is with problems created by his colleagues
for themselves and for him-created by the mere fact of these officials' existence-he is not
the man to shirk his duty. He reads through the draft with care, deletes the fussy
paragraphs added by C and H and restores the thing back to the form preferred in the first
instance by the able (if quarrelsome) F. He corrects the English-none of these young men
can write grammatically-and finally produces the same reply he would have written if
officials C to H had never been born. Far more people have taken far longer to produce
the same result. No one has been idle. All have done their best. And it is late in the
evening before A finally quits his office and begins the return journey to Ealing. The last
of the office lights are being turned off in the gathering dusk, which marks the end of
another day's administrative toil. Among the last to leave, A reflects, with bowed
- 3 -
shoulders and a wry smile that late hours, like gray hairs, are among the penalties of
success.
THE SCIENTIFIC PROOFS
From this description of the factors at work the student of political science will
recognize that administrators are more or less bound to multiply. Nothing has yet been
said, however, about the period of time likely to elapse between the date of A's
appointment and the date from which we can calculate the pensionable service of H. Vast
masses of statistical evidence have been collected and it is from a study of this data that
Parkinson's Law has been deduced. Space will not allow of detailed analysis, but research
began in the British Navy Estimates. These were chosen because the Admiralty's
responsibilities are more easily measurable than those of (say) the Board of Trade.
The accompanying table is derived from Admiralty statistics for 1914 and 1928. The
criticism voiced at the time centered on the comparison between the sharp fall in numbers
of those available for fighting and the sharp rise in those available only for
administration, the creation, it was said, of "a magnificent Navy on land." But that
comparison is not to the present purpose. What we have to note is that the 2,000
Admiralty officials of 1914 had become the 3,569 of 1928; and that this growth was
unrelated to any possible increase in their work. The Navy during that period had
diminished, in point of fact, by a third in men and two-thirds in ships. Nor, from 1922
onwards, was its strength even expected to increase, for its total of ships (unlike its total
of officials) was limited by the Washington Naval Agreement of that year. Yet in these
circumstances we had a 78.45 percent increase in Admiralty officials over a period of
fourteen years; an average increase of 5.6 percent a year on the earlier total. In fact, as we
shall see, the rate of increase was not as regular as that. All we have to consider, at this
stage, is the percentage rise over a given period.
ADMIRALTY STATISTICS
Percentage
1914 1928 increase or decrease
Capital ships in commission 62 20 -67.74
Officers and men in Royal Navy 146,000 100,000 -31.50
Dockyard workers 57,000 62,439 + 9.54
Dockyard officials and clerks 3,249 4,558 +40.28
Admiralty officials 2,000 3,569 +78.45
Can this rise in the total number of civil servants be accounted for except on the
assumption that such a total must always rise by a law governing its growth? It might be
urged, at this point, that the period under discussion was one of rapid development in
naval technique. The use of the flying machine was no longer confined to the eccentric.
Submarines were tolerated if not approved. Engineer officers were beginning to be
regarded as almost human. In so revolutionary an age we might expect the storekeepers
would have more elaborate inventories to compile. We might not wonder to see more
draughtsmen on the payroll, more designers, more technicians and scientists. But these,
the dockyard officials, increased only by 40 percent in number, while the men of
Whitehall increased by nearly 80 percent. For every new foreman or electrical engineer at
Portsmouth there had to be two or more clerks at Charing Cross. From this we might be
tempted to conclude, provisionally, that the rate of increase in administrative staff is
likely to be double that of the technical staff at a time when the actually useful strength
(in this case, of seamen) is being reduced by 31.5 percent. It has been proved, however,
statistically, that this last percentage is irrelevant. The Officials would have multiplied at
the same rate had there been no actual seamen at all.
- 4 -
It would be interesting to follow the further progress by which the 8,118 Admiralty
staff of 1935 came to number 33,788 by 1954. But the staff of the Colonial Office affords
a better field of study during a period of Imperial decline. The relevant statistics are set
down below. Before showing what the rate of increase is, we must observe that the extent
of this department's responsibilities was far from constant during these twenty years. The
colonial territories were not much altered in area or population between1935 and 1939.
They were considerably diminished by 1943, certain areas being in enemy hands. They
were increased again in 1947, but have since then shrunk steadily from year to year as
successive colonies achieve self-government.
COLONIAL OFFICE OFFICIALS
1935 1939 1943 1947 1954
372 450 817 1,139 1,661
It would be rational, prior to the discovery of Parkinson's Law, to suppose that these
changes in the scope of Empire would be reflected in the size of its central
administration. But a glance at the figures shows that the staff totals represent automatic
stages in an inevitable increase. And this increase, while related to that observed in other
departments, has nothing to do with the size - or even the existence - of the Empire. What
are the percentages of increase? We must ignore, for this purpose, the rapid increase in
staff, which accompanied the diminution of responsibility during World War II. We
should note rather the peacetime rates of increase over 5.24 percent between 1935 and
1939, and 6.55 percent between 1947 and 1954. This gives an average increase of 5.89
percent each year, a percentage markedly similar to that already found in the Admiralty
staff increase between 1914 and 1928.
Further and detailed statistical analysis of departmental staffs would be inappropriate
in such an article as this. It is hoped, however, to reach a tentative conclusion regarding
the time likely to elapse between a given official's first appointment and the later
appointment of his two or more assistants. Dealing with the problem of pure staff
accumulation, all the researches so far completed point to an average increase of about 5
4' percent per year. This fact established, it now becomes possible to state Parkinson's
Law in mathematical form, thus:
In any public administrative department not actually at war a staff increase may be
expected to follow this formula:
x = 2km + p
n
where k is the number of staff seeking promotion through the appointment of
subordinates; p represents the difference between the ages of appointment and retirement;
m is the number of man hours devoted to answering minutes within the department; and n
is the number of effective units being administered. Then x will be the number of new
staff required each year.
Mathematicians will, of course, realize that to find the percentage increase they must
multiply x by 100 and divide by the total of the previous year, thus:
100(2km + p)
yn
%
- 5 -
where y represents the total original staff. And this figure will invariably prove to be
between 5.17 percent and 6.56 percent, irrespective of any variation in the amount of
work (if any) to be done.
The discovery of this formula and of the general principles upon which it is based
has, of course, no emotive value. No attempt has been made to inquire whether
departments ought to grow in size. Those who hold that this growth is essential to gain
full employment are fully entitled to their opinion. Those who doubt the stability of an
economy based upon reading each other's minutes are equally entitled to theirs.
Parkinson's Law is a purely scientific discovery, inapplicable except in theory to the
politics of the day. It is not the business of the
Thursday, January 29, 2009
Star Performer
How to be a star performer:
Tough competition survival of the fittest is ned of the hour.
To put in extra effort to remain in the main stream & to face the challenges ahead . Hence the need to be a Star Performer.
They are not born but when average people put in extra efoorts consistently , they become star-performers.
Tips how to become Star Performer:
1) Purpose :
*Strong & specific & certainly linked to pain & pleasure
· 80 % of any success is WHY
· Therefore Pain & pleasure are in relation to WHY
· Flight/Train Miss PAIN Hence before time
· Movie PLEASURE Hence before time
· Marriage No Pain No Pl. Hence 7 to 10 PM
· TV Channel No Purpose Surf/Change Channels
· Purchase of YOGA books No Purpose No Specific purpose
· ,B.P.When there is pain then purchase
· Hence 1st Mantra is Purpose should be specific , clear , strong & all efforts directed.
2) Getting out of self-deception
· Getting out the soonest
· Too much analysis is paralysis
· When things don’t happen as wished , get yourself out without too much analysing
· Negative thoughts should be destroyed imediately
· Examples : 1) Describing a show without entry because no Entry Pass 2) When somebody says”I was thinking of calling you”
· When Teacher put 500Rs. Note, No front bencher got up because they were analysing. One back-bencher picked it up.
· Front benchers were doubting opportunities & themselves.
· People do not clap immediately. Response is slow because mind prevents them from clappingINSTEAD OF KFP ---BFP
Bahut Farak Penda
3) Natural / Unnatural
*Man first inhabited jungles..naturally
· Child throw the things naturally
· Feelings of anger
· Controling or resistence of anger/emotions..unnatural
· Unnatutal things/attitudes make man successful
· Self-discipline , control on anger,appreciation , co-operation are unnatural.So being successful , behave unnaturaly
4) Always on Your Switch
Use of energy
Talk positive-switch on
Non-sense-Off
PPLog- Off
How is office?
1st response: You are new , you will get answer after 3 Months.
He starts doubting.
Always put the switch on.
In the morning-Good talks , exercise,energetic
Office : Pleasant mood,positive thinking
Evening : Positive because family will put off their switch
I am successful
I will beileve in myself
I will create
I am a leader
Maintain relations with those from whom you get inspiration.Ensure your friends are of Krishna type & not Shakuni type.
5) Breakthrough ideas implemented by Star Performers
a) Initiative-Without being toldWhen HDFC-Fire gutted,operations from Basement Ask what initiative you have taken last month
Doing Costructive
b) Networking
Contact more people,know about others,Writedown details of persons,call people by name,send best wishes on b’days,strengthen relationships,Identify 5 people whom you would thank.
Put this on mirror & think how to be a sixer everyday
c) Self-Management
Smile , Posture , Eyes ,.
Problems are due to absence of ideas. Professional Cool
d) Perspective
Getting the big picture , wide focus , Bigger perspective..broad thinking , Be ambitious set a wider goal
e) Followership
Develop student mentality , star performer is a good follower,Create & nurture habit of learning,learn from mistakes,Remain hungry.
Make clippings file , topics media coverage
Everyday some knowledge.
f) Teamwork
Better to lose an argument than relationship , Am I known for being positive? , Appreciate people when least expected , 3 areas of effectiveness viz. Task ,team , individual , Task achieved –Team morale high , High Team spirit =. Team is helpful in generation of synergy . Team of 2 > 1 + 1
g) Leadership
Star understands his authority & limit.Lateral leadership:Owns more responsibility than authority. Main aim is to fulfil
responsibility. . Trusts people & gets ideas from them.
Success of Leadership lies in followership.Teacher sent a boy to
forest. Asked what noises they heard.Cuckoo, rustling of leaves, bees
, wind . Sent 2 nd time: To hear the unheard is
necessary discipline for a good ruler.9Opening of flower , sun
warming earth , Grass drinking morning dew. Once you listen to
peoples’ hearts, uncommunicated feelings , unexpressed pains,
unspoken complaints,then he can inspire confidence.Cheerful leader
who begins & ends the day with people.
h) Organizational savvy
What is said is imp.
How is v. imp.
What is unsaid is MIMP.
Respond do not react.
Never say you are wrong or do not agree.
SAY “ Do I understand you as saying”
“ Can we look at it this way”
Arguments make heat not light.
i) Show & Tell
How do I behave…..
When successful
criticized
rejected
appreciated
Habit of active listening Both the message & feeling behind message
They do things differently
Feel- Valued feeling.Feel the pulse of person
Felt-Same way as other individual does
Found: Found helping Help him to reevealuate feelings,sentiments,values
Politics,Cricket , Religion==== PCR do not react.
Avoid using generalized sentences , phrases & words like always ,never , All
Tough competition survival of the fittest is ned of the hour.
To put in extra effort to remain in the main stream & to face the challenges ahead . Hence the need to be a Star Performer.
They are not born but when average people put in extra efoorts consistently , they become star-performers.
Tips how to become Star Performer:
1) Purpose :
*Strong & specific & certainly linked to pain & pleasure
· 80 % of any success is WHY
· Therefore Pain & pleasure are in relation to WHY
· Flight/Train Miss PAIN Hence before time
· Movie PLEASURE Hence before time
· Marriage No Pain No Pl. Hence 7 to 10 PM
· TV Channel No Purpose Surf/Change Channels
· Purchase of YOGA books No Purpose No Specific purpose
· ,B.P.When there is pain then purchase
· Hence 1st Mantra is Purpose should be specific , clear , strong & all efforts directed.
2) Getting out of self-deception
· Getting out the soonest
· Too much analysis is paralysis
· When things don’t happen as wished , get yourself out without too much analysing
· Negative thoughts should be destroyed imediately
· Examples : 1) Describing a show without entry because no Entry Pass 2) When somebody says”I was thinking of calling you”
· When Teacher put 500Rs. Note, No front bencher got up because they were analysing. One back-bencher picked it up.
· Front benchers were doubting opportunities & themselves.
· People do not clap immediately. Response is slow because mind prevents them from clappingINSTEAD OF KFP ---BFP
Bahut Farak Penda
3) Natural / Unnatural
*Man first inhabited jungles..naturally
· Child throw the things naturally
· Feelings of anger
· Controling or resistence of anger/emotions..unnatural
· Unnatutal things/attitudes make man successful
· Self-discipline , control on anger,appreciation , co-operation are unnatural.So being successful , behave unnaturaly
4) Always on Your Switch
Use of energy
Talk positive-switch on
Non-sense-Off
PPLog- Off
How is office?
1st response: You are new , you will get answer after 3 Months.
He starts doubting.
Always put the switch on.
In the morning-Good talks , exercise,energetic
Office : Pleasant mood,positive thinking
Evening : Positive because family will put off their switch
I am successful
I will beileve in myself
I will create
I am a leader
Maintain relations with those from whom you get inspiration.Ensure your friends are of Krishna type & not Shakuni type.
5) Breakthrough ideas implemented by Star Performers
a) Initiative-Without being toldWhen HDFC-Fire gutted,operations from Basement Ask what initiative you have taken last month
Doing Costructive
b) Networking
Contact more people,know about others,Writedown details of persons,call people by name,send best wishes on b’days,strengthen relationships,Identify 5 people whom you would thank.
Put this on mirror & think how to be a sixer everyday
c) Self-Management
Smile , Posture , Eyes ,.
Problems are due to absence of ideas. Professional Cool
d) Perspective
Getting the big picture , wide focus , Bigger perspective..broad thinking , Be ambitious set a wider goal
e) Followership
Develop student mentality , star performer is a good follower,Create & nurture habit of learning,learn from mistakes,Remain hungry.
Make clippings file , topics media coverage
Everyday some knowledge.
f) Teamwork
Better to lose an argument than relationship , Am I known for being positive? , Appreciate people when least expected , 3 areas of effectiveness viz. Task ,team , individual , Task achieved –Team morale high , High Team spirit =. Team is helpful in generation of synergy . Team of 2 > 1 + 1
g) Leadership
Star understands his authority & limit.Lateral leadership:Owns more responsibility than authority. Main aim is to fulfil
responsibility. . Trusts people & gets ideas from them.
Success of Leadership lies in followership.Teacher sent a boy to
forest. Asked what noises they heard.Cuckoo, rustling of leaves, bees
, wind . Sent 2 nd time: To hear the unheard is
necessary discipline for a good ruler.9Opening of flower , sun
warming earth , Grass drinking morning dew. Once you listen to
peoples’ hearts, uncommunicated feelings , unexpressed pains,
unspoken complaints,then he can inspire confidence.Cheerful leader
who begins & ends the day with people.
h) Organizational savvy
What is said is imp.
How is v. imp.
What is unsaid is MIMP.
Respond do not react.
Never say you are wrong or do not agree.
SAY “ Do I understand you as saying”
“ Can we look at it this way”
Arguments make heat not light.
i) Show & Tell
How do I behave…..
When successful
criticized
rejected
appreciated
Habit of active listening Both the message & feeling behind message
They do things differently
Feel- Valued feeling.Feel the pulse of person
Felt-Same way as other individual does
Found: Found helping Help him to reevealuate feelings,sentiments,values
Politics,Cricket , Religion==== PCR do not react.
Avoid using generalized sentences , phrases & words like always ,never , All
Wednesday, January 28, 2009
CRM-More than Technology , its an emotional Bond.
CRM is more than Technology,its an emotional bond
Retailers understand in theory that CRM is the foundation of profitable retailing.
Key aspects of this are customer value , customer-care & customer-retention. Most modeern retailers have adopted Loyalty schemes.Consumers may have Loyalty-cards.
However , loyalty is an emotional bond & sophisticated technology & a piece of plastic are not sufficient to inspire it.
During current slowdown every retailer is seeking ways to hold on to customers by invoking loyalty thro’ various methods.
Retailers must establish the link between consumer experiences & repeat purchasing. Quality of a cxustomer-relationship has an impact on recency , frequency & value-factor.(RFV)
What has strongest effect to engender that all imp. Loyalty & make strategic investments in technology.
Technology cannot deliver loyalty on its own.
Analogy-MS Wordred & green lines appear when we make a mistake.Ability to select words , construct sentences & express thoughts is something Bill Gates did not develop in us. He could make these jobs a little easier.
Most of CRM Solution fail to deliver.
CRM based on 3 core elements:
People
Processes
Technology
The best in business have been quick to realise that you cannot install a system & expect it to deliver the desired results unless it addresses People & Process Issues.
Unless the gap between CRM Understanding & Technology iscloesd, all CRM projects are at risk.
In Retail CRM , technilogy should primarily workto enable following steps:
· Toestablish who your loyal customers are,their satisfaction levels & what exactly it is that makes them keep coming back.
· To identify the customers who do not come back & why.
One can set upon % of customers you want to retain., no. of customers you want to acquire , your marketing budgets to atract & retain those customers.
Loyalty does not have to be about prizes.Once you have determined what motivates your loyal customers to stay, you should create right mix of bonds to further improve retention
& increase their spending.
Basic rules of Cust. Service must be in place before we go insearch of any tools to implement.Technology should be easy to adapt to your set rules & goals , & most of alleasdy to use by Business Managers
Profitable Customer service is another term for organised retailing & finding the right mix is likely to lead to a very high chance of successful CRM in your retail business.
Retailers understand in theory that CRM is the foundation of profitable retailing.
Key aspects of this are customer value , customer-care & customer-retention. Most modeern retailers have adopted Loyalty schemes.Consumers may have Loyalty-cards.
However , loyalty is an emotional bond & sophisticated technology & a piece of plastic are not sufficient to inspire it.
During current slowdown every retailer is seeking ways to hold on to customers by invoking loyalty thro’ various methods.
Retailers must establish the link between consumer experiences & repeat purchasing. Quality of a cxustomer-relationship has an impact on recency , frequency & value-factor.(RFV)
What has strongest effect to engender that all imp. Loyalty & make strategic investments in technology.
Technology cannot deliver loyalty on its own.
Analogy-MS Wordred & green lines appear when we make a mistake.Ability to select words , construct sentences & express thoughts is something Bill Gates did not develop in us. He could make these jobs a little easier.
Most of CRM Solution fail to deliver.
CRM based on 3 core elements:
People
Processes
Technology
The best in business have been quick to realise that you cannot install a system & expect it to deliver the desired results unless it addresses People & Process Issues.
Unless the gap between CRM Understanding & Technology iscloesd, all CRM projects are at risk.
In Retail CRM , technilogy should primarily workto enable following steps:
· Toestablish who your loyal customers are,their satisfaction levels & what exactly it is that makes them keep coming back.
· To identify the customers who do not come back & why.
One can set upon % of customers you want to retain., no. of customers you want to acquire , your marketing budgets to atract & retain those customers.
Loyalty does not have to be about prizes.Once you have determined what motivates your loyal customers to stay, you should create right mix of bonds to further improve retention
& increase their spending.
Basic rules of Cust. Service must be in place before we go insearch of any tools to implement.Technology should be easy to adapt to your set rules & goals , & most of alleasdy to use by Business Managers
Profitable Customer service is another term for organised retailing & finding the right mix is likely to lead to a very high chance of successful CRM in your retail business.
Tuesday, January 13, 2009
Best Advice I Got
JAN. 22 , 2009
Jamshed Irani-Director TATA SONS
Out of every 10 menborn, 9 work for the tenth.Prepare to be tenth.
LN MITTAL
Reach for stars with foot on the ground
R SESHASAYEE MD ASHOK LEYLAND
Listen to your inner voice.
LORD SWARAJ PAUL 77
You can't build a successful biusiness without successful family.
ANAND MAHINDRA,53
Uphold your Family tradition.
JIGNESH SHAH , VC, MCX
Results matter, efforts don't.
A M NAIK CMD L& T
Be successful but not at the cost of principles.
PRASOON JOSHI,40
Difficult path leads you to destination. Beautiful path is destination itself.
AAMIR KHAN
Its better to go wrong with your own instincts than somebody else's.
DEEPAK PAREKH , 64
Work for a home-grown start-up.
NIMESH KAMPANI , JM FIN.
Never borrow for personal neds.
VENU SRINIVASAN TVS
Take risks but one at a time.
GM RAO GMR GROUP
Focus on one category.
NARESH GOYAL
Be better than the best.
RAMA PRASAD GOENKA
BE honest with your Banker , lawyer & doctor.
PIYUSH PANDEY
Take your work seriously & don't take yourself too seriously.
SHELLY LAZARUS CMD O & M
Pay attention to your people.
MOTILAL OSWAL
Aim for the highest education in your field.
SANJEEV BIKHCHANDANI , CEO , INFO EDGE
Its better to have cash in your account than in your Clients.
N SANKAR SANMAR GROUP
Ultimately , Management is common sense.
SAM BALSARA , MADISON
Job must be done & nothing is impossible.
ANU AGA , THERMAX
Invest in yourself.
HARSH MARIVALA , MARICO
nvest in people & empower them.
AKHIL GUPTA, CMD BLACKSTONE
Every problem can be traced back to failure of Management & leadership.
M V SUBBAIAH , MURUGAPPA
Understand your true strength.
UDAY KOTAK
The most important principles in life is humility & conservatissm.
KISHOR BIYANI,
Just watching Saravana store.
VIKRAM AKULA
Poor know a lot more than us.
SEEMA SANGHI, FORE GROUP
Focus , fair & firm.
VENUGOPAL DHOOT
Live & let live.
JS BINDRA STD CHAR. BANK
Remain in Asia.
M M SINGH , RANBAXY
Go with your gut.
DEEPAK PURI , MOSER BAER
Be fair in life, work & relationships.
VIKram KIRLOSKAR ,
Keep your Family priorities above everything else.
DILIP CHABRIA, FOUNDER DC DESIGN
When you risk everything , you get courage to succed.
AZIM PREMJI
Some of the brightest advice comes from junior-most employees.
SALVATORE FERRAGAMO , II BORRO VINEYARDS
If you keep at it , results will come.
KALPANA MORPARIA , JP MORGAN
You are too young to give up your executive post.
SANJAY NAYR , CITI BANK
This is the best job you will ever do.
ASHOK SOOTA , MINDTREE
Be ready to pay a little extra for a really worthwhile deal.
G MADHAVAN NAIR
Share the credit for sucess. Take ersponsibility for trouble.
GV PRASAD
Always raise the bar.
ADITYA PURI , MD , HDFC BANK
First know what you really want from life.
KIRAN MUZUMDAR
FAilure is temporary . It is giving up that is permanent.
RASHESH SHAH , EDELWEISS
MAke sure your employees aqre your partners
CAPT GOPINATH
Have total shraddha
WILLIAM LAUDER , ESTEE LAUDER
If anybody else gets control of your calendar , you are going to be a victim11
VINITA BALI
Don't give unsolicited advice
ASHISH DHAWAN,CHRYS CAPITAL
Psychology of investing is more imp than fundamentals of investing
CHETAN MAINI , REVA ELECTRIC CAR CO.
Do what you really love doing & nothing less than 200%
HARSH GOENKA,RPG GROUP
You have no right to the fruits of your actions
G ADANI
Trust your intuition
B RAMALINGA RAJU
If something takes 3 months to complete , ask why it can't be done in 1 week
M RAMMOHAN RAO, ISB
Ber confident but not arroagant
DEVI SHETTY, NARAYANA HEALTH CITY
Hands that help are holier than lips that prey
GVK REDDY,GVK Group
Cash in on oportunities at home.
S. SIVAKUMAR,ITC
Reinvent the wheel
SHANTANU PRAKASH , EDUCOMP
Remain focused in times of ctrisis & use that as an opportunity to become stronger
R. AGRAWAL, VISHAL MEGA MART
save more spend less
M JANAKIRAMAN , CONSIM INFO
Manage finances effectively
RAGHAV BEHL, NETWORK 18
Surround yourself with best people & set them free.
Jamshed Irani-Director TATA SONS
Out of every 10 menborn, 9 work for the tenth.Prepare to be tenth.
LN MITTAL
Reach for stars with foot on the ground
R SESHASAYEE MD ASHOK LEYLAND
Listen to your inner voice.
LORD SWARAJ PAUL 77
You can't build a successful biusiness without successful family.
ANAND MAHINDRA,53
Uphold your Family tradition.
JIGNESH SHAH , VC, MCX
Results matter, efforts don't.
A M NAIK CMD L& T
Be successful but not at the cost of principles.
PRASOON JOSHI,40
Difficult path leads you to destination. Beautiful path is destination itself.
AAMIR KHAN
Its better to go wrong with your own instincts than somebody else's.
DEEPAK PAREKH , 64
Work for a home-grown start-up.
NIMESH KAMPANI , JM FIN.
Never borrow for personal neds.
VENU SRINIVASAN TVS
Take risks but one at a time.
GM RAO GMR GROUP
Focus on one category.
NARESH GOYAL
Be better than the best.
RAMA PRASAD GOENKA
BE honest with your Banker , lawyer & doctor.
PIYUSH PANDEY
Take your work seriously & don't take yourself too seriously.
SHELLY LAZARUS CMD O & M
Pay attention to your people.
MOTILAL OSWAL
Aim for the highest education in your field.
SANJEEV BIKHCHANDANI , CEO , INFO EDGE
Its better to have cash in your account than in your Clients.
N SANKAR SANMAR GROUP
Ultimately , Management is common sense.
SAM BALSARA , MADISON
Job must be done & nothing is impossible.
ANU AGA , THERMAX
Invest in yourself.
HARSH MARIVALA , MARICO
nvest in people & empower them.
AKHIL GUPTA, CMD BLACKSTONE
Every problem can be traced back to failure of Management & leadership.
M V SUBBAIAH , MURUGAPPA
Understand your true strength.
UDAY KOTAK
The most important principles in life is humility & conservatissm.
KISHOR BIYANI,
Just watching Saravana store.
VIKRAM AKULA
Poor know a lot more than us.
SEEMA SANGHI, FORE GROUP
Focus , fair & firm.
VENUGOPAL DHOOT
Live & let live.
JS BINDRA STD CHAR. BANK
Remain in Asia.
M M SINGH , RANBAXY
Go with your gut.
DEEPAK PURI , MOSER BAER
Be fair in life, work & relationships.
VIKram KIRLOSKAR ,
Keep your Family priorities above everything else.
DILIP CHABRIA, FOUNDER DC DESIGN
When you risk everything , you get courage to succed.
AZIM PREMJI
Some of the brightest advice comes from junior-most employees.
SALVATORE FERRAGAMO , II BORRO VINEYARDS
If you keep at it , results will come.
KALPANA MORPARIA , JP MORGAN
You are too young to give up your executive post.
SANJAY NAYR , CITI BANK
This is the best job you will ever do.
ASHOK SOOTA , MINDTREE
Be ready to pay a little extra for a really worthwhile deal.
G MADHAVAN NAIR
Share the credit for sucess. Take ersponsibility for trouble.
GV PRASAD
Always raise the bar.
ADITYA PURI , MD , HDFC BANK
First know what you really want from life.
KIRAN MUZUMDAR
FAilure is temporary . It is giving up that is permanent.
RASHESH SHAH , EDELWEISS
MAke sure your employees aqre your partners
CAPT GOPINATH
Have total shraddha
WILLIAM LAUDER , ESTEE LAUDER
If anybody else gets control of your calendar , you are going to be a victim11
VINITA BALI
Don't give unsolicited advice
ASHISH DHAWAN,CHRYS CAPITAL
Psychology of investing is more imp than fundamentals of investing
CHETAN MAINI , REVA ELECTRIC CAR CO.
Do what you really love doing & nothing less than 200%
HARSH GOENKA,RPG GROUP
You have no right to the fruits of your actions
G ADANI
Trust your intuition
B RAMALINGA RAJU
If something takes 3 months to complete , ask why it can't be done in 1 week
M RAMMOHAN RAO, ISB
Ber confident but not arroagant
DEVI SHETTY, NARAYANA HEALTH CITY
Hands that help are holier than lips that prey
GVK REDDY,GVK Group
Cash in on oportunities at home.
S. SIVAKUMAR,ITC
Reinvent the wheel
SHANTANU PRAKASH , EDUCOMP
Remain focused in times of ctrisis & use that as an opportunity to become stronger
R. AGRAWAL, VISHAL MEGA MART
save more spend less
M JANAKIRAMAN , CONSIM INFO
Manage finances effectively
RAGHAV BEHL, NETWORK 18
Surround yourself with best people & set them free.
Monday, January 12, 2009
Its in your genes
Genes of an Organisation.
Orgs need a set of blue prints , in an endeavour to help them define their true calling.
What is a blue-print for an Org?
Co's workforce? or Value System?Or is it a set of policies , processes & practices that ensure smooth functioning of Org
It is all of this & more.
Human DNA defines who we are & what we do over a period of time.,will also define what we have.
ATOS origin's DNA is fearlessness./It is Fish which swims in turbulent waters & emerges victorious by fighting battles.
DNA of Org = Its importance lies in uniqueness of the culture & workings of an Org. It is a part of legacy of a Company that gets pased on to its employees.
DNA of an Org also lies within its personality & constitution,which largely determines how an Org behaves & results/targets it achieves.
It influences not only the foundation of Org but also other vital aspects like Mechanism of decision-making , flow of info,performance measurement , knowledge measurement & employee recognition.
DNA is an outline of what Company stands for.It is a summation of its various Brand-attributes,work-culture & environment , values , processes & poilicies of an Org. It is reflected in the way Employees think, feel & behave.It is a set of core , exclusive Org Traits which clearly demarcates Org from the rest.
DNA is the identity which distinguishes Org more thantheir products,or mission statements.It stands out as a mark in whatever Co. produces irrespective of what the tagline says or its Ad. campaign.
3Cs for CINCOM
Character , compeetnce & commitment.These form core of all initiatives
DNA binds employees together.
Right from its history to its vision,sense of belonging,ownership , bond
When you grow up, you add something to your DNA,Employes are facilitators , pillars who hold dna
mIESCHER'S THEORY OF dna .
Orgs need a set of blue prints , in an endeavour to help them define their true calling.
What is a blue-print for an Org?
Co's workforce? or Value System?Or is it a set of policies , processes & practices that ensure smooth functioning of Org
It is all of this & more.
Human DNA defines who we are & what we do over a period of time.,will also define what we have.
ATOS origin's DNA is fearlessness./It is Fish which swims in turbulent waters & emerges victorious by fighting battles.
DNA of Org = Its importance lies in uniqueness of the culture & workings of an Org. It is a part of legacy of a Company that gets pased on to its employees.
DNA of an Org also lies within its personality & constitution,which largely determines how an Org behaves & results/targets it achieves.
It influences not only the foundation of Org but also other vital aspects like Mechanism of decision-making , flow of info,performance measurement , knowledge measurement & employee recognition.
DNA is an outline of what Company stands for.It is a summation of its various Brand-attributes,work-culture & environment , values , processes & poilicies of an Org. It is reflected in the way Employees think, feel & behave.It is a set of core , exclusive Org Traits which clearly demarcates Org from the rest.
DNA is the identity which distinguishes Org more thantheir products,or mission statements.It stands out as a mark in whatever Co. produces irrespective of what the tagline says or its Ad. campaign.
3Cs for CINCOM
Character , compeetnce & commitment.These form core of all initiatives
DNA binds employees together.
Right from its history to its vision,sense of belonging,ownership , bond
When you grow up, you add something to your DNA,Employes are facilitators , pillars who hold dna
mIESCHER'S THEORY OF dna .
CCC-Call Centre Couples
8 AM TO 8 PM nobody at Home
Outsourcing comes home
Goodbye to Neighbourhood provision stores
When wants become neds
Bluring Roles & Responsibilities
Friendship replaces kinship
Spiritualism coexists with materialism
Outsourcing comes home
Goodbye to Neighbourhood provision stores
When wants become neds
Bluring Roles & Responsibilities
Friendship replaces kinship
Spiritualism coexists with materialism
Wednesday, January 7, 2009
corporate Governance
Corporate governance
Also found in: Acronyms, Hutchinson 0.04 sec.
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Business law
Business organizations
Basic forms:
Sole proprietorship
Corporation
Partnership
(General · Limited · LLP)
Cooperative
USA:
Business trust · LLC · LLLP
Delaware corporation
Nevada corporation
UK/Commonwealth:
Limited company
(By shares · By guarantee)
(Public · Proprietary)
Civil law countries:
AB · AG · ANS · A/S · GmbH
K.K. · N.V. · OY · S.A.
European Company Statute
Doctrines
Corporate governance
Limited liability · Ultra vires
Business judgment rule
De facto corporation and
corporation by estoppel
Piercing the corporate veil
Related areas of law
Contract · Civil procedure
Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way in which a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.
Corporate governance is a multi-faceted subject. An important theme of corporate governance deals with issues of accountability and fiduciary duty, essentially advocating the implementation of policies and mechanisms to ensure good behaviour and protect shareholders. Another key focus is the economic efficiency view, through which the corporate governance system should aim to optimize economic results, with a strong emphasis on shareholders welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view, which calls for more attention and accountability to players other than the shareholders (e.g.: the employees or the environment).
Recently there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high-profile collapses of a number of large U.S. firms such as Enron Corporation and Worldcom.
Board members and those with a responsibility for corporate governance are increasingly using the services of external providers to conduct anti-corruption auditing, due diligence and training.
Definition
The term corporate governance has come to mean two things.
* the processes by which all companies are directed and controlled.
* a field in economics, which studies the many issues arising from the separation of ownership and control.
Relevant rules include applicable laws of the land as well as internal rules of a corporation. Relationships include those between all related parties, the most important of which are the owners, managers, directors of the board, regulatory authorities and to a lesser extent employees and the community at large. Systems and processes deal with matters such as delegation of authority.
The corporate governance structure specifies the rules and procedures for making decisions on corporate affairs. It also provides the structure through which the company objectives are set, as well as the means of attaining and monitoring the performance of those objectives.
Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the organization to be more fully informed in order to maintain or alter organizational activity. Corporate governance is the mechanism by which individuals are motivated to align their actual behaviors with the overall participants.
In A Board Culture of Corporate Governance business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes'.
O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. Quality is determined by the financial markets, legislation and other external market forces plus the international organisational environment; how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centred on legislative policy, to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause.'[1] It is a system of structuring , operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs.
History
In the 19th century, state corporation law enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, to make corporate governance more efficient. Since that time, and because most large publicly traded corporations in the US are incorporated under corporate administration friendly Delaware law, and because the US's wealth has been increasingly securitized into various corporate entities and institutions, the rights of individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms.
In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the changing role of the modern corporation in society. Berle and Means' monograph "The Modern Corporation and Private Property" (1932, Macmillan) continues to have a profound influence on the conception of corporate governance in scholarly debates today.
From the Chicago school of economics, Ronald Coase's "Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Fifty years later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and Economics) firmly established agency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt (Academy of Management Review). US expansion after World War II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following Harvard Business School management professors published influential monographs studying their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior). According to Lorsch and MacIver "many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors."
Current preoccupation with corporate governance can be pinpointed at two events: The East Asian Financial Crisis of 1997 saw the economies of Thailand, Indonesia, South Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. The second event was the US corporate crises of which saw the collapse of two big corporations: Enron and WorldCom, and the ensuing scandals and collapses in other organizations such as Arthur Andersen, Global Crossing and Tyco.
Role of Institutional Investors
Many years ago, worldwide, buyers and sellers of corporation stocks were individual investors, such as wealthy businessmen or families, who often had a vested, personal and emotional interest in the corporations whose shares they owned. Over time, markets have become largely institutionalized: buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, hedge funds, investor groups, and banks).
The rise of the institutional investor has brought with it some increase of professional diligence which has tended to improve regulation of the stock market (but not necessarily in the interest of the small investor or even of the naïve institutions, of which there are many). Note that this process occurred simultaneously with the direct growth of individuals investing indirectly in the market (for example individuals have twice as much money in mutual funds as they do in bank accounts). However this growth occurred primarily by way of individuals turning over their funds to 'professionals' to manage, such as in mutual funds. In this way, the majority of investment now is described as "institutional investment" even though the vast majority of the funds are for the benefit of individual investors.
Program trading, the hallmark of institutional trading, is averaging over 60% a day in 2007.
Unfortunately, there has been a concurrent lapse in the oversight of large corporations, which are now almost all owned by large institutions. The Board of Directors of large corporations used to be chosen by the principal shareholders, who usually had an emotional as well as monetary investment in the company (think Ford), and the Board diligently kept an eye on the company and its principal executives (they usually hired and fired the President, or Chief executive officer— CEO).
Nowadays, if the owning institutions don't like what the President/CEO is doing and they feel that firing them will likely be costly (think "golden handshake") and/or time consuming, they will simply sell out their interest. The Board is now mostly chosen by the President/CEO, and may be made up primarily of their friends and associates, such as officers of the corporation or business colleagues. Since the (institutional) shareholders rarely object, the President/CEO generally takes the Chair of the Board position for his/herself (which makes it much more difficult for the institutional owners to "fire" him/her). Occasionally, but rarely, institutional investors support shareholder resolutions on such matters as executive pay and anti-takeover measures.
Finally, the largest pools of invested money (such as the mutual fund 'Vanguard 500', or the largest investment management firm for corporations, State Street Corp.) are designed simply to invest in a very large number of different companies with sufficient liquidity, based on the idea that this strategy will largely eliminate individual company financial or other risk and, therefore, these investors have even less interest in a particular company's governance.
Since the marked rise in the use of Internet transactions from the 1990s, both individual and professional stock investors around the world have emerged as a potential new kind of major (short term) force in the direct or indirect ownership of corporations and in the markets: the casual participant. Even as the purchase of individual shares in any one corporation by individual investors diminishes, the sale of derivatives (e.g., exchange-traded funds (ETFs), Stock market index options [1], etc.) has soared. So, the interests of most investors are now increasingly rarely tied to the fortunes of individual corporations.
But, the ownership of stocks in markets around the world varies; for example, the majority of the shares in the Japanese market are held by financial companies and industrial corporations (there is a large and deliberate amount of cross-holding among Japanese keiretsu corporations and within S. Korean chaebol 'groups') [2], whereas stock in the USA or the UK and Europe are much more broadly owned, often still by large individual investors.
In the latter half of the 1990s, during the Asian financial crisis, a lot of the attention fell upon the corporate governance systems of the developing world, which tend to be heavily into cronyism and nepotism.
In the first half of the 1990s, the issue of corporate governance in the U.S. received considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell) by their boards. CALPERS led a wave of institutional shareholder activism (something only very rarely seen before), as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e.g., by the unrestrained issuance of stock options, not infrequently back dated).
In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and Worldcom, as well as lesser corporate debacles, such as Adelphia Communications, AOL, Arthur Andersen, Global Crossing, Tyco, and, more recently, Fannie Mae and Freddie Mac, led to increased shareholder and governmental interest in corporate governance. This culminated in the passage of the Sarbanes-Oxley Act of 2002.[3] But, since then, the stock market has greatly recovered, and shareholder zeal has waned accordingly.
Parties to corporate governance
Parties involved in corporate governance include the regulatory body (e.g. the Chief Executive Officer, the board of directors, management and shareholders). Other stakeholders who take part include suppliers, employees, creditors, customers and the community at large.
In corporations, the shareholder delegates decision rights to the manager to act in the principal's best interests. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. Partly as a result of this separation between the two parties, a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. With the significant increase in equity holdings of investors, there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse.
A board of directors often plays a key role in corporate governance. It is their responsibility to endorse the organisation's strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organisation to its owners and authorities.
The Company Secretary, known as a Corporate Secretary in the US and often referred to as a Chartered Secretary if qualified by the Institute of Chartered Secretaries and Administrators (ICSA), is a high ranking professional who is trained to uphold the highest standards of corporate governance, effective operations, compliance and administration.
All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organisation. Directors, workers and management receive salaries, benefits and reputation, while shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital.
A key factor in an individual's decision to participate in an organisation e.g. through providing financial capital and trust that they will receive a fair share of the organisational returns. If some parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse.
Principles
Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization.
Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular, senior executives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts of interest, and disclosure in financial reports.
Commonly accepted principles of corporate governance include:
* Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings.
* Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.
* Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. The key roles of chairperson and CEO should not be held by the same person.
* Integrity and ethical behaviour: Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that systemic reliance on integrity and ethics is bound to eventual failure. Because of this, many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries.
* Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.
Issues involving corporate governance principles include:
* oversight of the preparation of the entity's financial statements
* internal controls and the independence of the entity's auditors
* review of the compensation arrangements for the chief executive officer and other senior executives
* the way in which individuals are nominated for positions on the board
* the resources made available to directors in carrying out their duties
* oversight and management of risk
* dividend policy
Mechanisms and controls
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. For example, to monitor managers' behaviour, an independent third party (the auditor) attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability.
Internal corporate governance controls
Internal corporate governance controls monitor activities and then take corrective action to accomplish organisational goals. Examples include:
* Monitoring by the board of directors: The board of directors, with its legal authority to hire, fire and compensate top management, safeguards invested capital. Regular board meetings allow potential problems to be identified, discussed and avoided. Whilst non-executive directors are thought to be more independent, they may not always result in more effective corporate governance and may not increase performance.[2] Different board structures are optimal for different firms. Moreover, the ability of the board to monitor the firm's executives is a function of its access to information. Executive directors possess superior knowledge of the decision-making process and therefore evaluate top management on the basis of the quality of its decisions that lead to financial performance outcomes, ex ante. It could be argued, therefore, that executive directors look beyond the financial criteria.
* Remuneration: Performance-based remuneration is designed to relate some proportion of salary to individual performance. It may be in the form of cash or non-cash payments such as shares and share options, superannuation or other benefits. Such incentive schemes, however, are reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behaviour, and can elicit myopic behaviour.
External corporate governance controls
External corporate governance controls encompass the controls external stakeholders exercise over the organisation. Examples include:
* debt covenants
* government regulations
* media pressure
* takeovers
* competition
* managerial labour market
* telephone tapping
Systemic problems of corporate governance
* Supply of accounting information: Financial accounts form a crucial link in enabling providers of finance to monitor directors. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. This should, ideally, be corrected by the working of the external auditing process.
* Demand for information: A barrier to shareholders using good information is the cost of processing it, especially to a small shareholder. The traditional answer to this problem is the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts that financial markets are efficient), which suggests that the shareholder will free ride on the judgements of larger professional investors.
* Monitoring costs: In order to influence the directors, the shareholders must combine with others to form a significant voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting.
Role of the accountant
Financial reporting is a crucial element necessary for the corporate governance system to function effectively. Accountants and auditors are the primary providers of information to capital market participants. The directors of the company should be entitled to expect that management prepare the financial information in compliance with statutory and ethical obligations, and rely on auditors' competence.
Current accounting practice allows a degree of choice of method in determining the method of measurement, criteria for recognition, and even the definition of the accounting entity. The exercise of this choice to improve apparent performance (popularly known as creative accounting) imposes extra information costs on users. In the extreme, it can involve non-disclosure of information.
One area of concern is whether the accounting firm acts as both the independent auditor and management consultant to the firm they are auditing. This may result in a conflict of interest which places the integrity of financial reports in doubt due to client pressure to appease management. The power of the corporate client to initiate and terminate management consulting services and, more fundamentally, to select and dismiss accounting firms contradicts the concept of an independent auditor. Changes enacted in the United States in the form of the Sarbanes-Oxley Act (in response to the Enron situation as noted below) prohibit accounting firms from providing both auditing and management consulting services.
The Enron collapse is an example of misleading financial reporting. Enron concealed huge losses by creating illusions that a third party was contractually obliged to pay the amount of any losses. However, the third party was an entity in which Enron had a substantial economic stake. In discussions of accounting practices with Arthur Andersen, the partner in charge of auditing, views inevitably led to the client prevailing.
However, good financial reporting is not a sufficient condition for the effectiveness of corporate governance if users don't process it, or if the informed user is unable to exercise a monitoring role due to high costs (see Systemic problems of corporate governance above).
Regulation
Main article: Regulation
Self-regulation
Rules versus principles
Rules are typically thought to be simpler to follow than principles, demarcating a clear line between acceptable and unacceptable behaviour. Rules also reduce discretion on the part of individual managers or auditors.
In practice rules can be more complex than principles. They may be ill-equipped to deal with new types of transactions not covered by the code. Moreover, even if clear rules are followed, one can still find a way to circumvent their underlying purpose - this is harder to achieve if one is bound by a broader principle.
Principles on the other hand is a form of self regulation. It allows the sector to determine what standards are acceptable or unacceptable. It also pre-empts over zealous legislations that might not be practical.
Enforcement
Enforcement can affect the overall credibility of a regulatory system. They both deter bad actors and level the competitive playing field. Nevertheless, greater enforcement is not always better, for taken too far it can dampen valuable risk-taking. In practice, however, this is largely a theoretical, as opposed to a real, risk.
Corporate governance models around the world
Anglo-American Model
There are many different models of corporate governance around the world. These differ according to the variety of capitalism in which they are embedded. The liberal model that is common in Anglo-American countries tends to give priority to the interests of shareholders. The coordinated model that one finds in Continental Europe and Japan also recognizes the interests of workers, managers, suppliers, customers, and the community. Both models have distinct competitive advantages, but in different ways. The liberal model of corporate governance encourages radical innovation and cost competition, whereas the coordinated model of corporate governance facilitates incremental innovation and quality competition. However, there are important differences between the U.S. recent approach to governance issues and what has happened in the U.K..
In the United States, a corporation is governed by a board of directors, which has the power to choose an executive officer, usually known as the chief executive officer. The CEO has broad power to manage the corporation on a daily basis, but needs to get board approval for certain major actions, such as hiring his/her immediate subordinates, raising money, acquiring another company, major capital expansions, or other expensive projects. Other duties of the board may include policy setting, decision making, monitoring management's performance, or corporate control.
The board of directors is nominally selected by and responsible to the shareholders, but the bylaws of many companies make it difficult for all but the largest shareholders to have any influence over the makeup of the board; normally, individual shareholders are not offered a choice of board nominees among which to choose, but are merely asked to rubberstamp the nominees of the sitting board. Perverse incentives have pervaded many corporate boards in the developed world, with board members beholden to the chief executive whose actions they are intended to oversee. Frequently, members of the boards of directors are CEOs of other corporations, which some[3] see as a conflict of interest.
The U.K. has pioneered a flexible model of regulation of corporate governance, known as the "comply or explain" code of governance. This is a principle based code that lists a dozen of recommended practices, such as the separation of CEO and Chairman of the Board, the introduction of a time limit for CEOs' contracts, the introduction of a minimum number of non-executives Directors, of independent directors, the designation of a senior non executive director, the formation and composition of remuneration, audit and nomination committees. Publicly listed companies in the U.K. have to either apply those principles or, if they choose not to, to explain in a designated part of their annual reports why they decided not to do so. The monitoring of those explanations is left to shareholders themselves. The tenet of the Code is that one size does not fit all in matters of corporate governance and that instead of a statury regime like the Sarbanes-Oxley Act in the U.S., it is best to leave some flexibility to companies so that they can make choices most adapted to their circumstances. If they have good reasons to deviate from the sound rule, they should be able to convincingly explain those to their shareholders.
The code has been in place since 1993 and has had drastic effects on the way firms are governed in the U.K. A study by Arcot, Bruno and Faure-Grimaud from the Financial Markets Group at the London School of Economics shows that in 1993, about 10% of the UK companies member of the FTSE 350 were compliants on all dimensions while they were more than 60% in 2003. The same success was not achieved when looking at the explanation part for non compliant companies. Many deviations are simply not explained and a large majority of explanations fail to identify specific circumstances justifying those deviations. Still, the overall view is that the U.K.'s system works fairly well and in fact is often branded as a benchmark, followed by several countries.
Non Anglo-American Model
In East Asian countries, family-owned companies dominate. A study by Claessens, Djankov and Lang (2000) investigated the top 15 families in East Asian countries and found that they dominated listed corporate assets. In countries such as Pakistan, Indonesia and the Philippines, the top 15 families controlled over 50% of publicly owned corporations through a system of family cross-holdings, thus dominating the capital markets. Family-owned companies also dominate the Latin model of corporate governance, that is companies in Mexico, Italy, Spain, France (to a certain extent), Brazil, Argentina, and other countries in South America.
Europe and Asia exemplify the insider system: Shareholder and stakeholder • a small number of listed companies, • an illiquid capital market where ownership and control are not frequently traded • high concentration of shareholding in the hands of corporations, institutions, families or government. • the insider model uses a system of interlocking networks and committees.
Codes and guidelines
Corporate governance principles and codes have been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have a coercive effect.
For example, companies quoted on the London and Toronto Stock Exchanges formally need not follow the recommendations of their respective national codes. However, they must disclose whether they follow the recommendations in those documents and, where not, they should provide explanations concerning divergent practices. Such disclosure requirements exert a significant pressure on listed companies for compliance.
In the United States, companies are primarily regulated by the state in which they incorporate though they are also regulated by the federal government and, if they are public, by their stock exchange. The highest number of companies are incorporated in Delaware, including more than half of the Fortune 500. This is due to Delaware's generally business-friendly corporate legal environment and the existence of a state court dedicated solely to business issues (Delaware Court of Chancery).
Most states' corporate law generally follow the American Bar Association's Model Business Corporation Act. While Delaware does not follow the Act, it still considers its provisions and several prominent Delaware justices, including former Delaware Supreme Court Chief Justice E. Norman Veasey, participate on ABA committees.
One issue that has been raised since the Disney decision[4] in 2005 is the degree to which companies manage their governance responsibilities; in other words, do they merely try to supersede the legal threshold, or should they create governance guidelines that ascend to the level of best practice. For example, the guidelines issued by associations of directors (see Section 3 above), corporate managers and individual companies tend to be wholly voluntary. For example, The GM Board Guidelines reflect the company’s efforts to improve its own governance capacity. Such documents, however, may have a wider multiplying effect prompting other companies to adopt similar documents and standards of best practice.
One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance. This was revised in 2004. The OECD remains a proponent of corporate governance principles throughout the world.
The World Business Council for Sustainable Development WBCSD has also done substantial work on corporate governance, particularly on accountability and reporting, and in 2004 created an Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks.This document aims to provide general information, a "snap-shot" of the landscape and a perspective from a think-tank/professional association on a few key codes, standards and frameworks relevant to the sustainability agenda.
Corporate governance and firm performance
In its 'Global Investor Opinion Survey' of over 200 institutional investors first undertaken in 2000 and updated in 2002, McKinsey found that 80% of the respondents would pay a premium for well-governed companies. They defined a well-governed company as one that had mostly out-side directors, who had no management ties, undertook formal evaluation of its directors, and was responsive to investors' requests for information on governance issues. The size of the premium varied by market, from 11% for Canadian companies to around 40% for companies where the regulatory backdrop was least certain (those in Morocco, Egypt and Russia).
Other studies have linked broad perceptions of the quality of companies to superior share price performance. In a study of five year cumulative returns of Fortune Magazine's survey of 'most admired firms', Antunovich et al found that those "most admired" had an average return of 125%, whilst the 'least admired' firms returned 80%. In a separate study Business Week enlisted institutional investors and 'experts' to assist in differentiating between boards with good and bad governance and found that companies with the highest rankings had the highest financial returns.
On the other hand, research into the relationship between specific corporate governance controls and firm performance has been mixed and often weak. The following examples are illustrative.
Board composition
Some researchers have found support for the relationship between frequency of meetings and profitability. Others have found a negative relationship between the proportion of external directors and firm performance, while others found no relationship between external board membership and performance. In a recent paper Bagahat and Black found that companies with more independent boards do not perform better than other companies. It is unlikely that board composition has a direct impact on firm performance.
Remuneration/Compensation
The results of previous research on the relationship between firm performance and executive compensation have failed to find consistent and significant relationships between executives' remuneration and firm performance. Low average levels of pay-performance alignment do not necessarily imply that this form of governance control is inefficient. Not all firms experience the same levels of agency conflict, and external and internal monitoring devices may be more effective for some than for others.
Some researchers have found that the largest CEO performance incentives came from ownership of the firm's shares, while other researchers found that the relationship between share ownership and firm performance was dependent on the level of ownership. The results suggest that increases in ownership above 20% cause management to become more entrenched, and less interested in the welfare of their shareholders.
Some argue that firm performance is positively associated with share option plans and that these plans direct managers' energies and extend their decision horizons toward the long-term, rather than the short-term, performance of the company. However, that point of view came under substantial criticism circa in the wake of various security scandals including mutual fund timing episodes and, in particular, the backdating of option grants as documented by University of Iowa academic Erik Lie and reported by James Blander and Charles Forelle of the Wall Street Journal.
Even before the negative influence on public opinion caused by the 2006 backdating scandal, use of options faced various criticisms. A particularly forceful and long running argument concerned the interaction of executive options with corporate stock repurchase programs. Numerous authorities (including U.S. Federal Reserve Board economist Weisbenner) determined options may be employed in concert with stock buybacks in a manner contrary to shareholder interests. These authors argued that, in part, corporate stock buybacks for U.S. Standard & Poors 500 companies surged to a $500 billion annual rate in late 2006 because of the impact of options. A compendium of academic works on the option/buyback issue is included in the study Scandalby author M. Gumport issued in 2006.
A combination of accounting changes and governance issues led options to become a less popular means of remuneration as 2006 progressed, and various alternative implementations of buybacks surfaced to challenge the dominance of "open market" cash buybacks as the preferred means of implementing a share repurchase plan.
Corporate governance and developing countries
At the same time that developing countries are undergoing a process of economic growth and transformation, they are also experiencing a revolution in the business and political relationships that characterize their private and public sectors. Establishing good corporate governance practices is essential to sustaining long-term development and growth as these countries move from closed, market-unfriendly, undemocratic systems towards open, market-friendly, democratic systems. Good corporate governance systems will allow organizations to realize their maximum productivity and efficiency, minimize corruption and abuse of power, and provide a system of managerial accountability.[5] These goals are equally important for both private corporations and government bodies.
Because of the implicit relationship between private interests and the larger government, good corporate governance practices are essential to establishing good governance at the national level in developing countries.[6] A number of ties the keep the public and private sectors closely linked. On one hand, judiciary and regulatory bodies as well as legislatures play a role in corporate management and oversight. At the same time cartels and large corporate interests use their size to exert not only economic, but also political power. These two sectors are so intertwined that, according to the report Corporate Governance in Development: The Experiences of Brazil, Chile, India, and South Africa, a country cannot significantly change one without simultaneously instituting changes in the other.[7]
According to Nicolas Meisel, there are four priorities which developing countries should concentrate on while experimenting with new forms of corporate and public governance. The first is to focus on improving the quality of information and increasing the speed at which it is created and distributed to the public. Good communication is important to the functioning of any organization. The second is to allow individual actors more autonomy while at the same time maintaining or increasing accountability. Thirdly, if a hierarchical organization used to orient private activities toward the general interest, new countervailing powers should be encouraged to fill this role. Finally, the part the state plays and how government officials are selected must be considered if a developing economy is to achieve sustainable growth. This may involve making it easier for newcomers with new ideas incumbents who may hold to older, possibly outdated, models.[8]
See also
* Agency cost
* Agency Theory
* Basel II
* Business ethics
* Corporate behaviour
* Corporate benefit
* Corporate crime
* Compliance and Ethics Programs
* Corporate Law Economic Reform Program
* Cadbury Report
* Corporate Social Responsibility
* Corporation
* Foreign Corrupt Practices Act
* Institutional fund management
* Golden Parachute
* Governance
* King I
* King II
* Legal origins theory
* Risk management
* Sarbanes-Oxley Act
* Stakeholder theory
* Takeovers and poison pills
References
1. ^ Corporate Governance International Journal, "A Board Culture of Corporate Governance, Vol 6 Issue 3 (2003)
2. ^ Bhagat & Black, "The Uncertain Relationship Between Board Composition and Firm Performance", 54 Business Lawyer)
3. ^ Theyrule.net
4. ^ The Disney Decision of 2005 and the precedent it sets for corporate governance and fiduciary responsibility, Kuckreja, Akin Gump, Aug 2005
5. ^ Business for Development: Fostering the Private Sector. OECD Development Centre. Paris: OECD Publications, 2007 (149-152).
6. ^ Nicolas Meisel, Governance Culture and Development (Paris: OECD Publishing, 2004) SourceOECD, 27 July 2007 (12).
7. ^ Corporate Governance in Development: The Experiences of Brazil, Chile, India, and South Africa. ed. Charles P. Oman. OECD Development Centre and CIPE, 2006.
8. ^ Nicolas Meisel, Governance Culture and Development (Paris: OECD Publishing, 2004) SourceOECD, 27 July 2007 (120).
* Arcot, Sridhar, Bruno, Valentina and Antoine Faure-Grimaud, "Corporate Governance in the U.K.: is the comply-or-explain working?" (December 2005). FMG CG Working Paper 001.
* Becht, Marco, Patrick Bolton, Ailsa Röell, "Corporate Governance and Control" (October 2002; updated August 2004). ECGI - Finance Working Paper No. 02/2002.
* Brickley, James A., William S. Klug and Jerold L. Zimmerman, Managerial Economics & Organizational Architecture, ISBN
* Cadbury, Sir Adrian, "The Code of Best Practice", Report of the Committee on the Financial Aspects of Corporate Governance, Gee and Co Ltd, 1992. Available online from http://www.ecgi.org/codes
* Cadbury, Sir Adrian, "Corporate Governance: Brussels", Instituut voor Bestuurders, Brussels, 1996.
* Claessens, Stijn, Djankov, Simeon & Lang, Larry H.P. (2000) The Separation of Ownership and Control in East Asian Corporations, Journal of Financial Economics, 58: 81-112
* Clarke, Thomas (ed.) (2004) "Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance," London and New York: Routledge, ISBN-X
* Clarke, Thomas (ed.) (2004) "Critical Perspectives on Business and Management: 5 Volume Series on Corporate Governance - Genesis, Anglo-American, European, Asian and Contemporary Corporate Governance" London and New York: Routledge, ISBN
* Clarke, Thomas & dela Rama, Marie (eds.) (2006) "Corporate Governance and Globalization" London and Thousand Oaks, CA: SAGE, ISBN
* Colley, J., Doyle, J., Logan, G., Stettinius, W., What is Corporate Governance ? (McGraw-Hill, December 2004) ISBN
* Easterbrook, Frank H. and Daniel R. Fischel, The Economic Structure of Corporate Law, ISBN
* Erturk, Ismail, Froud, Julie, Johal, Sukhdev and Williams, Karel (2004) Corporate Governance and Disappointment Review of International Political Economy, 11 (4): 677-713.
* Garrett, Allison, "Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets," 32 Denv. J. Int’l L. & Pol’y).
* Holton, Glyn A (2006). Investor Suffrage Movement, Financial Analysits Journal, 62 (6), 15–20.
* Monks, Robert A.G. and Minow, Nell, Corporate Governance (Blackwell 2004) ISBN
* Monks, Robert A.G. and Minow, Nell, Power and Accountability (HarperBusiness 1991), full text available online
* New York Society of Securities Analysts, 2003, Corporate Governance Handbook,
* OECD (1999, 2004) Principles of Corporate Governance Paris: OECD)
* Özekmekçi, Abdullah, Mert (2004) "The Correlation between Corporate Governance and Public Relations", Istanbul Bilgi University.
* Whittington, G. "Corporate Governance and the Regulation of Financial Reporting", Accounting and Business Research, Vol. 2, 1993, Corporate Governance Special Issue, pp. 311-319.
* World Business Council for Sustainable Development WBCSD (2004) Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks
External links
This article has too many unnecessary external links.
Please help Wikipedia by organising, removing or transferring them to other articles.
* A Collection of Corporate Governance Documents from Global Accountancy Bodies (IFACnet)
* ICSA (The Institute of Company Secretaries and Administrators)
* ICGN (The International Corporate Governance Network)
* The National Association of Corporate Directors
* OCEG: A Nonprofit Standards Organization that Integrates Governance, Risk and Compliance Principles
* The Global Corporate Governance Forum
* Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks
* The Millstein Center for Corporate Governance and Performance at the Yale School of Management
* World Bank Corporate Governance Reports
* Governance Focus: the full range of governance, ethics, CSR, social responsibility, development and compliance, in English & Spanish
* The French Corporate Governance Institute
* CG@LSE The Corporate Governance research programme at the Financial Markets Group
* An Introduction to Corporate Regulation
* Interchange Solutions Limited Experts in corporate governance
* ReguStand dedicated for helping SMEs achieve better governance
* Corporate Governance Brasil
* The Society of Corporate Secretaries & Governance Professionals
* The Center for International Private Enterprise: Corporate Governance
* The Conference Board Governance Center
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Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way in which a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.
Corporate governance is a multi-faceted subject. An important theme of corporate governance deals with issues of accountability and fiduciary duty, essentially advocating the implementation of policies and mechanisms to ensure good behaviour and protect shareholders. Another key focus is the economic efficiency view, through which the corporate governance system should aim to optimize economic results, with a strong emphasis on shareholders welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view, which calls for more attention and accountability to players other than the shareholders (e.g.: the employees or the environment).
Recently there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high-profile collapses of a number of large U.S. firms such as Enron Corporation and Worldcom.
Board members and those with a responsibility for corporate governance are increasingly using the services of external providers to conduct anti-corruption auditing, due diligence and training.
Definition
The term corporate governance has come to mean two things.
* the processes by which all companies are directed and controlled.
* a field in economics, which studies the many issues arising from the separation of ownership and control.
Relevant rules include applicable laws of the land as well as internal rules of a corporation. Relationships include those between all related parties, the most important of which are the owners, managers, directors of the board, regulatory authorities and to a lesser extent employees and the community at large. Systems and processes deal with matters such as delegation of authority.
The corporate governance structure specifies the rules and procedures for making decisions on corporate affairs. It also provides the structure through which the company objectives are set, as well as the means of attaining and monitoring the performance of those objectives.
Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the organization to be more fully informed in order to maintain or alter organizational activity. Corporate governance is the mechanism by which individuals are motivated to align their actual behaviors with the overall participants.
In A Board Culture of Corporate Governance business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes'.
O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. Quality is determined by the financial markets, legislation and other external market forces plus the international organisational environment; how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centred on legislative policy, to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause.'[1] It is a system of structuring , operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs.
History
In the 19th century, state corporation law enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, to make corporate governance more efficient. Since that time, and because most large publicly traded corporations in the US are incorporated under corporate administration friendly Delaware law, and because the US's wealth has been increasingly securitized into various corporate entities and institutions, the rights of individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms.
In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the changing role of the modern corporation in society. Berle and Means' monograph "The Modern Corporation and Private Property" (1932, Macmillan) continues to have a profound influence on the conception of corporate governance in scholarly debates today.
From the Chicago school of economics, Ronald Coase's "Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Fifty years later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and Economics) firmly established agency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt (Academy of Management Review). US expansion after World War II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following Harvard Business School management professors published influential monographs studying their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior). According to Lorsch and MacIver "many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors."
Current preoccupation with corporate governance can be pinpointed at two events: The East Asian Financial Crisis of 1997 saw the economies of Thailand, Indonesia, South Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. The second event was the US corporate crises of which saw the collapse of two big corporations: Enron and WorldCom, and the ensuing scandals and collapses in other organizations such as Arthur Andersen, Global Crossing and Tyco.
Role of Institutional Investors
Many years ago, worldwide, buyers and sellers of corporation stocks were individual investors, such as wealthy businessmen or families, who often had a vested, personal and emotional interest in the corporations whose shares they owned. Over time, markets have become largely institutionalized: buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, hedge funds, investor groups, and banks).
The rise of the institutional investor has brought with it some increase of professional diligence which has tended to improve regulation of the stock market (but not necessarily in the interest of the small investor or even of the naïve institutions, of which there are many). Note that this process occurred simultaneously with the direct growth of individuals investing indirectly in the market (for example individuals have twice as much money in mutual funds as they do in bank accounts). However this growth occurred primarily by way of individuals turning over their funds to 'professionals' to manage, such as in mutual funds. In this way, the majority of investment now is described as "institutional investment" even though the vast majority of the funds are for the benefit of individual investors.
Program trading, the hallmark of institutional trading, is averaging over 60% a day in 2007.
Unfortunately, there has been a concurrent lapse in the oversight of large corporations, which are now almost all owned by large institutions. The Board of Directors of large corporations used to be chosen by the principal shareholders, who usually had an emotional as well as monetary investment in the company (think Ford), and the Board diligently kept an eye on the company and its principal executives (they usually hired and fired the President, or Chief executive officer— CEO).
Nowadays, if the owning institutions don't like what the President/CEO is doing and they feel that firing them will likely be costly (think "golden handshake") and/or time consuming, they will simply sell out their interest. The Board is now mostly chosen by the President/CEO, and may be made up primarily of their friends and associates, such as officers of the corporation or business colleagues. Since the (institutional) shareholders rarely object, the President/CEO generally takes the Chair of the Board position for his/herself (which makes it much more difficult for the institutional owners to "fire" him/her). Occasionally, but rarely, institutional investors support shareholder resolutions on such matters as executive pay and anti-takeover measures.
Finally, the largest pools of invested money (such as the mutual fund 'Vanguard 500', or the largest investment management firm for corporations, State Street Corp.) are designed simply to invest in a very large number of different companies with sufficient liquidity, based on the idea that this strategy will largely eliminate individual company financial or other risk and, therefore, these investors have even less interest in a particular company's governance.
Since the marked rise in the use of Internet transactions from the 1990s, both individual and professional stock investors around the world have emerged as a potential new kind of major (short term) force in the direct or indirect ownership of corporations and in the markets: the casual participant. Even as the purchase of individual shares in any one corporation by individual investors diminishes, the sale of derivatives (e.g., exchange-traded funds (ETFs), Stock market index options [1], etc.) has soared. So, the interests of most investors are now increasingly rarely tied to the fortunes of individual corporations.
But, the ownership of stocks in markets around the world varies; for example, the majority of the shares in the Japanese market are held by financial companies and industrial corporations (there is a large and deliberate amount of cross-holding among Japanese keiretsu corporations and within S. Korean chaebol 'groups') [2], whereas stock in the USA or the UK and Europe are much more broadly owned, often still by large individual investors.
In the latter half of the 1990s, during the Asian financial crisis, a lot of the attention fell upon the corporate governance systems of the developing world, which tend to be heavily into cronyism and nepotism.
In the first half of the 1990s, the issue of corporate governance in the U.S. received considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell) by their boards. CALPERS led a wave of institutional shareholder activism (something only very rarely seen before), as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e.g., by the unrestrained issuance of stock options, not infrequently back dated).
In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and Worldcom, as well as lesser corporate debacles, such as Adelphia Communications, AOL, Arthur Andersen, Global Crossing, Tyco, and, more recently, Fannie Mae and Freddie Mac, led to increased shareholder and governmental interest in corporate governance. This culminated in the passage of the Sarbanes-Oxley Act of 2002.[3] But, since then, the stock market has greatly recovered, and shareholder zeal has waned accordingly.
Parties to corporate governance
Parties involved in corporate governance include the regulatory body (e.g. the Chief Executive Officer, the board of directors, management and shareholders). Other stakeholders who take part include suppliers, employees, creditors, customers and the community at large.
In corporations, the shareholder delegates decision rights to the manager to act in the principal's best interests. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. Partly as a result of this separation between the two parties, a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. With the significant increase in equity holdings of investors, there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse.
A board of directors often plays a key role in corporate governance. It is their responsibility to endorse the organisation's strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organisation to its owners and authorities.
The Company Secretary, known as a Corporate Secretary in the US and often referred to as a Chartered Secretary if qualified by the Institute of Chartered Secretaries and Administrators (ICSA), is a high ranking professional who is trained to uphold the highest standards of corporate governance, effective operations, compliance and administration.
All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organisation. Directors, workers and management receive salaries, benefits and reputation, while shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital.
A key factor in an individual's decision to participate in an organisation e.g. through providing financial capital and trust that they will receive a fair share of the organisational returns. If some parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse.
Principles
Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization.
Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular, senior executives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts of interest, and disclosure in financial reports.
Commonly accepted principles of corporate governance include:
* Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings.
* Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.
* Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. The key roles of chairperson and CEO should not be held by the same person.
* Integrity and ethical behaviour: Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that systemic reliance on integrity and ethics is bound to eventual failure. Because of this, many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries.
* Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.
Issues involving corporate governance principles include:
* oversight of the preparation of the entity's financial statements
* internal controls and the independence of the entity's auditors
* review of the compensation arrangements for the chief executive officer and other senior executives
* the way in which individuals are nominated for positions on the board
* the resources made available to directors in carrying out their duties
* oversight and management of risk
* dividend policy
Mechanisms and controls
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. For example, to monitor managers' behaviour, an independent third party (the auditor) attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability.
Internal corporate governance controls
Internal corporate governance controls monitor activities and then take corrective action to accomplish organisational goals. Examples include:
* Monitoring by the board of directors: The board of directors, with its legal authority to hire, fire and compensate top management, safeguards invested capital. Regular board meetings allow potential problems to be identified, discussed and avoided. Whilst non-executive directors are thought to be more independent, they may not always result in more effective corporate governance and may not increase performance.[2] Different board structures are optimal for different firms. Moreover, the ability of the board to monitor the firm's executives is a function of its access to information. Executive directors possess superior knowledge of the decision-making process and therefore evaluate top management on the basis of the quality of its decisions that lead to financial performance outcomes, ex ante. It could be argued, therefore, that executive directors look beyond the financial criteria.
* Remuneration: Performance-based remuneration is designed to relate some proportion of salary to individual performance. It may be in the form of cash or non-cash payments such as shares and share options, superannuation or other benefits. Such incentive schemes, however, are reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behaviour, and can elicit myopic behaviour.
External corporate governance controls
External corporate governance controls encompass the controls external stakeholders exercise over the organisation. Examples include:
* debt covenants
* government regulations
* media pressure
* takeovers
* competition
* managerial labour market
* telephone tapping
Systemic problems of corporate governance
* Supply of accounting information: Financial accounts form a crucial link in enabling providers of finance to monitor directors. Imperfections in the financial reporting process will cause imperfections in the effectiveness of corporate governance. This should, ideally, be corrected by the working of the external auditing process.
* Demand for information: A barrier to shareholders using good information is the cost of processing it, especially to a small shareholder. The traditional answer to this problem is the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts that financial markets are efficient), which suggests that the shareholder will free ride on the judgements of larger professional investors.
* Monitoring costs: In order to influence the directors, the shareholders must combine with others to form a significant voting group which can pose a real threat of carrying resolutions or appointing directors at a general meeting.
Role of the accountant
Financial reporting is a crucial element necessary for the corporate governance system to function effectively. Accountants and auditors are the primary providers of information to capital market participants. The directors of the company should be entitled to expect that management prepare the financial information in compliance with statutory and ethical obligations, and rely on auditors' competence.
Current accounting practice allows a degree of choice of method in determining the method of measurement, criteria for recognition, and even the definition of the accounting entity. The exercise of this choice to improve apparent performance (popularly known as creative accounting) imposes extra information costs on users. In the extreme, it can involve non-disclosure of information.
One area of concern is whether the accounting firm acts as both the independent auditor and management consultant to the firm they are auditing. This may result in a conflict of interest which places the integrity of financial reports in doubt due to client pressure to appease management. The power of the corporate client to initiate and terminate management consulting services and, more fundamentally, to select and dismiss accounting firms contradicts the concept of an independent auditor. Changes enacted in the United States in the form of the Sarbanes-Oxley Act (in response to the Enron situation as noted below) prohibit accounting firms from providing both auditing and management consulting services.
The Enron collapse is an example of misleading financial reporting. Enron concealed huge losses by creating illusions that a third party was contractually obliged to pay the amount of any losses. However, the third party was an entity in which Enron had a substantial economic stake. In discussions of accounting practices with Arthur Andersen, the partner in charge of auditing, views inevitably led to the client prevailing.
However, good financial reporting is not a sufficient condition for the effectiveness of corporate governance if users don't process it, or if the informed user is unable to exercise a monitoring role due to high costs (see Systemic problems of corporate governance above).
Regulation
Main article: Regulation
Self-regulation
Rules versus principles
Rules are typically thought to be simpler to follow than principles, demarcating a clear line between acceptable and unacceptable behaviour. Rules also reduce discretion on the part of individual managers or auditors.
In practice rules can be more complex than principles. They may be ill-equipped to deal with new types of transactions not covered by the code. Moreover, even if clear rules are followed, one can still find a way to circumvent their underlying purpose - this is harder to achieve if one is bound by a broader principle.
Principles on the other hand is a form of self regulation. It allows the sector to determine what standards are acceptable or unacceptable. It also pre-empts over zealous legislations that might not be practical.
Enforcement
Enforcement can affect the overall credibility of a regulatory system. They both deter bad actors and level the competitive playing field. Nevertheless, greater enforcement is not always better, for taken too far it can dampen valuable risk-taking. In practice, however, this is largely a theoretical, as opposed to a real, risk.
Corporate governance models around the world
Anglo-American Model
There are many different models of corporate governance around the world. These differ according to the variety of capitalism in which they are embedded. The liberal model that is common in Anglo-American countries tends to give priority to the interests of shareholders. The coordinated model that one finds in Continental Europe and Japan also recognizes the interests of workers, managers, suppliers, customers, and the community. Both models have distinct competitive advantages, but in different ways. The liberal model of corporate governance encourages radical innovation and cost competition, whereas the coordinated model of corporate governance facilitates incremental innovation and quality competition. However, there are important differences between the U.S. recent approach to governance issues and what has happened in the U.K..
In the United States, a corporation is governed by a board of directors, which has the power to choose an executive officer, usually known as the chief executive officer. The CEO has broad power to manage the corporation on a daily basis, but needs to get board approval for certain major actions, such as hiring his/her immediate subordinates, raising money, acquiring another company, major capital expansions, or other expensive projects. Other duties of the board may include policy setting, decision making, monitoring management's performance, or corporate control.
The board of directors is nominally selected by and responsible to the shareholders, but the bylaws of many companies make it difficult for all but the largest shareholders to have any influence over the makeup of the board; normally, individual shareholders are not offered a choice of board nominees among which to choose, but are merely asked to rubberstamp the nominees of the sitting board. Perverse incentives have pervaded many corporate boards in the developed world, with board members beholden to the chief executive whose actions they are intended to oversee. Frequently, members of the boards of directors are CEOs of other corporations, which some[3] see as a conflict of interest.
The U.K. has pioneered a flexible model of regulation of corporate governance, known as the "comply or explain" code of governance. This is a principle based code that lists a dozen of recommended practices, such as the separation of CEO and Chairman of the Board, the introduction of a time limit for CEOs' contracts, the introduction of a minimum number of non-executives Directors, of independent directors, the designation of a senior non executive director, the formation and composition of remuneration, audit and nomination committees. Publicly listed companies in the U.K. have to either apply those principles or, if they choose not to, to explain in a designated part of their annual reports why they decided not to do so. The monitoring of those explanations is left to shareholders themselves. The tenet of the Code is that one size does not fit all in matters of corporate governance and that instead of a statury regime like the Sarbanes-Oxley Act in the U.S., it is best to leave some flexibility to companies so that they can make choices most adapted to their circumstances. If they have good reasons to deviate from the sound rule, they should be able to convincingly explain those to their shareholders.
The code has been in place since 1993 and has had drastic effects on the way firms are governed in the U.K. A study by Arcot, Bruno and Faure-Grimaud from the Financial Markets Group at the London School of Economics shows that in 1993, about 10% of the UK companies member of the FTSE 350 were compliants on all dimensions while they were more than 60% in 2003. The same success was not achieved when looking at the explanation part for non compliant companies. Many deviations are simply not explained and a large majority of explanations fail to identify specific circumstances justifying those deviations. Still, the overall view is that the U.K.'s system works fairly well and in fact is often branded as a benchmark, followed by several countries.
Non Anglo-American Model
In East Asian countries, family-owned companies dominate. A study by Claessens, Djankov and Lang (2000) investigated the top 15 families in East Asian countries and found that they dominated listed corporate assets. In countries such as Pakistan, Indonesia and the Philippines, the top 15 families controlled over 50% of publicly owned corporations through a system of family cross-holdings, thus dominating the capital markets. Family-owned companies also dominate the Latin model of corporate governance, that is companies in Mexico, Italy, Spain, France (to a certain extent), Brazil, Argentina, and other countries in South America.
Europe and Asia exemplify the insider system: Shareholder and stakeholder • a small number of listed companies, • an illiquid capital market where ownership and control are not frequently traded • high concentration of shareholding in the hands of corporations, institutions, families or government. • the insider model uses a system of interlocking networks and committees.
Codes and guidelines
Corporate governance principles and codes have been developed in different countries and issued from stock exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the support of governments and international organizations. As a rule, compliance with these governance recommendations is not mandated by law, although the codes linked to stock exchange listing requirements may have a coercive effect.
For example, companies quoted on the London and Toronto Stock Exchanges formally need not follow the recommendations of their respective national codes. However, they must disclose whether they follow the recommendations in those documents and, where not, they should provide explanations concerning divergent practices. Such disclosure requirements exert a significant pressure on listed companies for compliance.
In the United States, companies are primarily regulated by the state in which they incorporate though they are also regulated by the federal government and, if they are public, by their stock exchange. The highest number of companies are incorporated in Delaware, including more than half of the Fortune 500. This is due to Delaware's generally business-friendly corporate legal environment and the existence of a state court dedicated solely to business issues (Delaware Court of Chancery).
Most states' corporate law generally follow the American Bar Association's Model Business Corporation Act. While Delaware does not follow the Act, it still considers its provisions and several prominent Delaware justices, including former Delaware Supreme Court Chief Justice E. Norman Veasey, participate on ABA committees.
One issue that has been raised since the Disney decision[4] in 2005 is the degree to which companies manage their governance responsibilities; in other words, do they merely try to supersede the legal threshold, or should they create governance guidelines that ascend to the level of best practice. For example, the guidelines issued by associations of directors (see Section 3 above), corporate managers and individual companies tend to be wholly voluntary. For example, The GM Board Guidelines reflect the company’s efforts to improve its own governance capacity. Such documents, however, may have a wider multiplying effect prompting other companies to adopt similar documents and standards of best practice.
One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance. This was revised in 2004. The OECD remains a proponent of corporate governance principles throughout the world.
The World Business Council for Sustainable Development WBCSD has also done substantial work on corporate governance, particularly on accountability and reporting, and in 2004 created an Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks.This document aims to provide general information, a "snap-shot" of the landscape and a perspective from a think-tank/professional association on a few key codes, standards and frameworks relevant to the sustainability agenda.
Corporate governance and firm performance
In its 'Global Investor Opinion Survey' of over 200 institutional investors first undertaken in 2000 and updated in 2002, McKinsey found that 80% of the respondents would pay a premium for well-governed companies. They defined a well-governed company as one that had mostly out-side directors, who had no management ties, undertook formal evaluation of its directors, and was responsive to investors' requests for information on governance issues. The size of the premium varied by market, from 11% for Canadian companies to around 40% for companies where the regulatory backdrop was least certain (those in Morocco, Egypt and Russia).
Other studies have linked broad perceptions of the quality of companies to superior share price performance. In a study of five year cumulative returns of Fortune Magazine's survey of 'most admired firms', Antunovich et al found that those "most admired" had an average return of 125%, whilst the 'least admired' firms returned 80%. In a separate study Business Week enlisted institutional investors and 'experts' to assist in differentiating between boards with good and bad governance and found that companies with the highest rankings had the highest financial returns.
On the other hand, research into the relationship between specific corporate governance controls and firm performance has been mixed and often weak. The following examples are illustrative.
Board composition
Some researchers have found support for the relationship between frequency of meetings and profitability. Others have found a negative relationship between the proportion of external directors and firm performance, while others found no relationship between external board membership and performance. In a recent paper Bagahat and Black found that companies with more independent boards do not perform better than other companies. It is unlikely that board composition has a direct impact on firm performance.
Remuneration/Compensation
The results of previous research on the relationship between firm performance and executive compensation have failed to find consistent and significant relationships between executives' remuneration and firm performance. Low average levels of pay-performance alignment do not necessarily imply that this form of governance control is inefficient. Not all firms experience the same levels of agency conflict, and external and internal monitoring devices may be more effective for some than for others.
Some researchers have found that the largest CEO performance incentives came from ownership of the firm's shares, while other researchers found that the relationship between share ownership and firm performance was dependent on the level of ownership. The results suggest that increases in ownership above 20% cause management to become more entrenched, and less interested in the welfare of their shareholders.
Some argue that firm performance is positively associated with share option plans and that these plans direct managers' energies and extend their decision horizons toward the long-term, rather than the short-term, performance of the company. However, that point of view came under substantial criticism circa in the wake of various security scandals including mutual fund timing episodes and, in particular, the backdating of option grants as documented by University of Iowa academic Erik Lie and reported by James Blander and Charles Forelle of the Wall Street Journal.
Even before the negative influence on public opinion caused by the 2006 backdating scandal, use of options faced various criticisms. A particularly forceful and long running argument concerned the interaction of executive options with corporate stock repurchase programs. Numerous authorities (including U.S. Federal Reserve Board economist Weisbenner) determined options may be employed in concert with stock buybacks in a manner contrary to shareholder interests. These authors argued that, in part, corporate stock buybacks for U.S. Standard & Poors 500 companies surged to a $500 billion annual rate in late 2006 because of the impact of options. A compendium of academic works on the option/buyback issue is included in the study Scandalby author M. Gumport issued in 2006.
A combination of accounting changes and governance issues led options to become a less popular means of remuneration as 2006 progressed, and various alternative implementations of buybacks surfaced to challenge the dominance of "open market" cash buybacks as the preferred means of implementing a share repurchase plan.
Corporate governance and developing countries
At the same time that developing countries are undergoing a process of economic growth and transformation, they are also experiencing a revolution in the business and political relationships that characterize their private and public sectors. Establishing good corporate governance practices is essential to sustaining long-term development and growth as these countries move from closed, market-unfriendly, undemocratic systems towards open, market-friendly, democratic systems. Good corporate governance systems will allow organizations to realize their maximum productivity and efficiency, minimize corruption and abuse of power, and provide a system of managerial accountability.[5] These goals are equally important for both private corporations and government bodies.
Because of the implicit relationship between private interests and the larger government, good corporate governance practices are essential to establishing good governance at the national level in developing countries.[6] A number of ties the keep the public and private sectors closely linked. On one hand, judiciary and regulatory bodies as well as legislatures play a role in corporate management and oversight. At the same time cartels and large corporate interests use their size to exert not only economic, but also political power. These two sectors are so intertwined that, according to the report Corporate Governance in Development: The Experiences of Brazil, Chile, India, and South Africa, a country cannot significantly change one without simultaneously instituting changes in the other.[7]
According to Nicolas Meisel, there are four priorities which developing countries should concentrate on while experimenting with new forms of corporate and public governance. The first is to focus on improving the quality of information and increasing the speed at which it is created and distributed to the public. Good communication is important to the functioning of any organization. The second is to allow individual actors more autonomy while at the same time maintaining or increasing accountability. Thirdly, if a hierarchical organization used to orient private activities toward the general interest, new countervailing powers should be encouraged to fill this role. Finally, the part the state plays and how government officials are selected must be considered if a developing economy is to achieve sustainable growth. This may involve making it easier for newcomers with new ideas incumbents who may hold to older, possibly outdated, models.[8]
See also
* Agency cost
* Agency Theory
* Basel II
* Business ethics
* Corporate behaviour
* Corporate benefit
* Corporate crime
* Compliance and Ethics Programs
* Corporate Law Economic Reform Program
* Cadbury Report
* Corporate Social Responsibility
* Corporation
* Foreign Corrupt Practices Act
* Institutional fund management
* Golden Parachute
* Governance
* King I
* King II
* Legal origins theory
* Risk management
* Sarbanes-Oxley Act
* Stakeholder theory
* Takeovers and poison pills
References
1. ^ Corporate Governance International Journal, "A Board Culture of Corporate Governance, Vol 6 Issue 3 (2003)
2. ^ Bhagat & Black, "The Uncertain Relationship Between Board Composition and Firm Performance", 54 Business Lawyer)
3. ^ Theyrule.net
4. ^ The Disney Decision of 2005 and the precedent it sets for corporate governance and fiduciary responsibility, Kuckreja, Akin Gump, Aug 2005
5. ^ Business for Development: Fostering the Private Sector. OECD Development Centre. Paris: OECD Publications, 2007 (149-152).
6. ^ Nicolas Meisel, Governance Culture and Development (Paris: OECD Publishing, 2004) SourceOECD, 27 July 2007
7. ^ Corporate Governance in Development: The Experiences of Brazil, Chile, India, and South Africa. ed. Charles P. Oman. OECD Development Centre and CIPE, 2006.
8. ^ Nicolas Meisel, Governance Culture and Development (Paris: OECD Publishing, 2004) SourceOECD, 27 July 2007
* Arcot, Sridhar, Bruno, Valentina and Antoine Faure-Grimaud, "Corporate Governance in the U.K.: is the comply-or-explain working?" (December 2005). FMG CG Working Paper 001.
* Becht, Marco, Patrick Bolton, Ailsa Röell, "Corporate Governance and Control" (October 2002; updated August 2004). ECGI - Finance Working Paper No. 02/2002.
* Brickley, James A., William S. Klug and Jerold L. Zimmerman, Managerial Economics & Organizational Architecture, ISBN
* Cadbury, Sir Adrian, "The Code of Best Practice", Report of the Committee on the Financial Aspects of Corporate Governance, Gee and Co Ltd, 1992. Available online from http://www.ecgi.org/codes
* Cadbury, Sir Adrian, "Corporate Governance: Brussels", Instituut voor Bestuurders, Brussels, 1996.
* Claessens, Stijn, Djankov, Simeon & Lang, Larry H.P. (2000) The Separation of Ownership and Control in East Asian Corporations, Journal of Financial Economics, 58: 81-112
* Clarke, Thomas (ed.) (2004) "Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance," London and New York: Routledge, ISBN-X
* Clarke, Thomas (ed.) (2004) "Critical Perspectives on Business and Management: 5 Volume Series on Corporate Governance - Genesis, Anglo-American, European, Asian and Contemporary Corporate Governance" London and New York: Routledge, ISBN
* Clarke, Thomas & dela Rama, Marie (eds.) (2006) "Corporate Governance and Globalization" London and Thousand Oaks, CA: SAGE, ISBN
* Colley, J., Doyle, J., Logan, G., Stettinius, W., What is Corporate Governance ? (McGraw-Hill, December 2004) ISBN
* Easterbrook, Frank H. and Daniel R. Fischel, The Economic Structure of Corporate Law, ISBN
* Erturk, Ismail, Froud, Julie, Johal, Sukhdev and Williams, Karel (2004) Corporate Governance and Disappointment Review of International Political Economy, 11 (4): 677-713.
* Garrett, Allison, "Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets," 32 Denv. J. Int’l L. & Pol’y).
* Holton, Glyn A (2006). Investor Suffrage Movement, Financial Analysits Journal, 62 (6), 15–20.
* Monks, Robert A.G. and Minow, Nell, Corporate Governance (Blackwell 2004) ISBN
* Monks, Robert A.G. and Minow, Nell, Power and Accountability (HarperBusiness 1991), full text available online
* New York Society of Securities Analysts, 2003, Corporate Governance Handbook,
* OECD (1999, 2004) Principles of Corporate Governance Paris: OECD)
* Özekmekçi, Abdullah, Mert (2004) "The Correlation between Corporate Governance and Public Relations", Istanbul Bilgi University.
* Whittington, G. "Corporate Governance and the Regulation of Financial Reporting", Accounting and Business Research, Vol. 2, 1993, Corporate Governance Special Issue, pp. 311-319.
* World Business Council for Sustainable Development WBCSD (2004) Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks
External links
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Please help Wikipedia by organising, removing or transferring them to other articles.
* A Collection of Corporate Governance Documents from Global Accountancy Bodies (IFACnet)
* ICSA (The Institute of Company Secretaries and Administrators)
* ICGN (The International Corporate Governance Network)
* The National Association of Corporate Directors
* OCEG: A Nonprofit Standards Organization that Integrates Governance, Risk and Compliance Principles
* The Global Corporate Governance Forum
* Issue Management Tool: Strategic challenges for business in the use of corporate responsibility codes, standards, and frameworks
* The Millstein Center for Corporate Governance and Performance at the Yale School of Management
* World Bank Corporate Governance Reports
* Governance Focus: the full range of governance, ethics, CSR, social responsibility, development and compliance, in English & Spanish
* The French Corporate Governance Institute
* CG@LSE The Corporate Governance research programme at the Financial Markets Group
* An Introduction to Corporate Regulation
* Interchange Solutions Limited Experts in corporate governance
* ReguStand dedicated for helping SMEs achieve better governance
* Corporate Governance Brasil
* The Society of Corporate Secretaries & Governance Professionals
* The Center for International Private Enterprise: Corporate Governance
* The Conference Board Governance Center
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