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IMPROVING CORPORATE GOVERNANCE PRACTICES - ICC ISTANBUL ROUNDTABLE, 21APRIL 2005
Roundtable report
Because corporate governance is not just a box ticking exercise, companies need an exchange of experience and practical guidance in order to conceive and implement successful governance mechanisms.
The ICC Roundtables on Corporate Governance are important international fora attended by business leaders from all parts of the world. The Roundtable discussions give a renewed impetus to ICC's efforts to provide constructive outreach to business on corporate governance issues in all parts of the world. Featuring speakers from business and government and an enthusiastic audience of ICC members and guests, the Roundtables, which bring together international investors and companies as well as governments, have proved successful in identifying practical ways to advance effective corporate governance programmes.
This ICC Roundtable, which took place on 21 April 2005 in Istanbul, Turkey, follows a successful first Roundtable held on 13 October 2005 in Beijing, China, to review corporate governance practices in Asian companies.
In this report, the discussions have been supplemented by interviews of participants and corporate experiences shared during the Roundtable. This report could be used as a guide to find solutions to practical issues that may be faced when dealing with board conflicts or when advising on corporate governance restructuring.
THE REPORTED VIEWS REFLECT THOSE OF THE ROUNDTABLE'S PARTICIPANTS AND NOT NECESSARILY THOSE OF ICC.
Session 1: Assessing good corporate governance
Rating agencies, institutional investors and the media have a key influence on corporate governance practices. The recent financial debacles have showed that investors are very receptive to financial and also non-financial information. Assessing the corporate governance of a company requires that analysts look at a multitude of factors that vary from the business environment in which the company evolves to the effectiveness of its board.
Session 2: The continuity of family owned companies
Good education of family board members, good understanding of family dynamics and trusted professionals on the board are crucial to the continuity of family owned companies. Compliance with the most important governance rules could be done at no cost for family businesses and SMEs. Exit mechanisms and succession planning need to be carefully thought by boards to ensure that the right family members are involved in the decision making. Non-listed companies should not wait for governments and international organizations to impose strict regulations, but should get together to share ideas and develop self-regulatory solutions.
Session 3: An effective board
An effective board has the duty to inform and reward shareholders. Boards are evaluated based on culture, behavior and training. The board plays a major role in assessing and mana
ging risk for the company. The flow of information within the board is crucial to its effectiveness.
Session 4: Balancing majority and minority shareholders
Minority shareholders may need to use contractual instruments to ensure that their rights are appropriately respected. Exit routes and dispute settlement mechanisms are needed to deal with conflicts that may arise with shareholders in a cost efficient and smooth way.
Session 5: Managing corporate governance impact on investment portfolio
The Warren Buffet model and Value activist role model are extensively used by investors when managing a portfolio. The Cairo and Alexandria Stock Exchange experience shows how an emerging market has integrated successfully corporate governance principles to improve its capitalization and liquidity. The example of the Italian Stock Exchange STAR segment illustrates how corporate governance when well implemented could boost the financial performance of mid-cap companies.
Conclusion
The roundtable demonstrated very explicitly that there is not a one-size-fits-all model. There are several corporate governance models in the world, based on local business practices and cultural patterns. However, universal governance values and principles do exist and are common to all systems; these are:
- Accountability
- Responsibility
- Transparency
- Fairness
Full report: ICC Report on the Istanbul Roundtable - Press release: Business makes recommendations on corporate governance
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