Posts tagged ‘Governance’

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Stakeholder Value
Niki Lukviarman | July 7, 2009 | 4:16 am

Organizational value that is generated for stakeholders by creating, implementing, and managing effective strategies, processes, activities, assets, etc. Sustainable value creation for stakeholders occurs when the benefits to them are greater than the resources that are expended on a consistent and ongoing basis. Value is generally measured in financial terms (as in the case of shareholders), but can also be measured as social or environmental benefit or organizational reputation (as in the case of both shareholders and other stakeholders).

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 7)

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Governance; Performance and Conformance
Niki Lukviarman | July 7, 2009 | 4:16 am
Governance; the set of responsibilities and practices exercised by the board and executive management (the governing body) with the goal of (a) providing strategic direction, (b) ensuring that objectives are achieved, (c) ascertaining that risks are managed appropriately, and (b) verifying that organization’s resources are used responsibly (this definition reflects both the performance and conformance aspects of governance).

Performance; policies and procedures that (a) focus on opportunities and risks, strategy, value creation, and resource utilization, and (b) guide an organization’s decision-making.

Conformance; compliance with laws and regulations, best practice governance codes, accountability, and the provision of assurances to stakeholders in general. The term can refer to (a) internal factors defined by the officers, shareholders, or constitution of an organization, as well as, (b) external forces such as consumer groups, clients and regulators

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, pp. 6-7)

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Governing Body
Niki Lukviarman | July 7, 2009 | 4:15 am
The governing body is the person(s) or organization(s) (e.g., a board of directors) with primary responsibility for overseeing (a) the strategic direction of the entity and (b) the accountability of the entity. This includes overseeing the financial reporting process. Governing bodies can be made up of independent and non-independent directors and can have various sub-committees, such as the audit committee, the renumeration committee, and the ethics committee. In some entities in some jurisdictions, the governing body may include management personnel, for example, executive members of a governance board of a private or public sector entity, or an owner-manager. In some cases the governing body is responsible for approving the entity’s financial statements ( in other cases management has this responsibility). In most large organizations, there can be multiple organizational levels, each with specific authority and responsibility for governance.

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 7)

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Governance Framework
Niki Lukviarman | July 7, 2009 | 4:14 am

The governance framework is composed of two dimensions: the performance dimension and the conformance dimension, which together represent the entire value creation, resource utilization, and accountability framework of an organization.

The conformance dimension tends to take a historic view, whilde the performance dimension is more forward-looking view, organizations can also address many of the risks associated with non-conformance and help ensure that effective measures are in place.

Conformance responsibilities focus on providing assurances to stakeholders:

- Concerning the effectiveness of the identification, prioritization, management, control, mitigation, and reporting of strategic, tactical and operational risks

- That the organization is working effectively and efficiently to achieve its strategic and operational goals

- That the systems generating financial and non-financial information are working within prescribed standards of accuracy and reliability, and that such information reflects the true performance of the organization

- That management’s fiduciary responsibility responsibilities are being met

- That the organization is able to prevent and detect criminal activities such as fraud, money laundering, theft, and misappropriation

- That the organization complies with all (other) relevant rules and regulations

Performance responsibilities focus on strategy, value creation, and resource utilization, and include:

- Establishment of a robust decision-making process, including the determination of risk apetite. Oversight of strategy implementation and evaluation of the strategy’s ongoing relevance and success

- Alignment of business operations and resource utilization with strategic direction and the organization’s levels of risk apetite

- Identification of the critical points at which an organization needs to make decisions in response to changing conditions

Performance and conformance dimensions enhance each other and the organization as a whole.

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, pp. 8-9)

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Organizational Values: the Private Sector
Niki Lukviarman | July 7, 2009 | 4:13 am

In the private sector, the fundamental values/principles can be defined as:

- Integrity: steadfast adherence to a strict moral or ethical code. Governing bodies should foster integrity in their organization through their leadership, strategy, policies, information, and culture

- Accountability: responsibility to stakeholders

- Transparency (openness): disclosure of information is seen as the basis for the confidence that needs to exist between a business and its stakeholders

- Other examples of organizational values/principles are: ethical and responsible decision making, due care, truth and trust

Source; IFA (Evaluating and Improving Governance in Organizations, 2009, p. 20)

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