Tag Archives: Corporate Governance

New Year, New Day

It’s 6:45 a.m. and I am in the office. There is a cool calm in the morning before the rush of activity. There is a peace that comes with knowing the whole day is before you and what happened yesterday, happened yesterday.

A similar feeling is enjoyed at the beginning of a new year – a sense of new beginnings, new dreams, new projects combined with the wisdom of yesteryear.

This blog – since it was conceived over 3 years ago – was a platform for my consulting business, Hipona Consulting. It has turned into a place to express business endeavors, learnings from key projects and weekly inspiration in the form of quotes and photography.

This blog will continue. It may take a new form – as a new year takes form and the morning sun burns on the horizon – but it will continue.

A wise woman – my sister Dr. Leah Clark – told me some time ago that consistency is key in blogging. I cannot agree more! Therefore, weekly posts will continue as I share the journey of Hipona Consulting and the challenges (and opportunities!) that come with doing business in Latin America, a women exploring leadership excellence (in the form of corporate governance and organizational leaders) and being an entrepreneur in an unforgiving world.

A new day. A new year. Happy 2016. May the writing and exploration begin!

EMC

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Don’t be a “copy cat”. We want to hear your voice, your ideas, your work. Be authentic and true. Write with mistakes and correct them later. Go with the flow of your ideas and you will see that it leads you to somewhere that no one else could have imagined or written down. You cannot copy inspiration. Intelligence. Wit. Yourself.

If you do copy. Do so gracefully. State where you took the information. Hat tip your source. Thank someone who inspired you.

If you copy and take praise, remember that it is not professional and you lose moral authority as a person or entity or project you are associated with. Although the source may never find out, you will know that you did and that’s what matters.

– EMC

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Six Principles for Doing Business in Latam

Strategy and Business published a piece on doing business where governance is weak. They talk about how to succeed in markets that are prone to ethical and legal risks and focus their article on examples in Asia and the Middle East. It’s a fascinating read and one that illustrates principles for doing business that can be applied to our region of focus – Latin America.
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Here are six of those principles that are crucial to doing business in Latam:

1) align vision and values – this is about ensuring that all stakeholders – from board members to business unit leaders – share the company vision and their corporate values which includes ethical behaviour and how to deliver a product or service in the region. This is particularly important when managing country operations from headquarters outside the region (e.g. from the US or Europe).

2) understand the “way to play” at the local level – uniquely local ways to play exist and should be planned for. How relationships are built and how local talent is utilized is extremely important when contemplating success in Latin American markets.

3) identify key stakeholders – as mentioned in earlier blog posts, it’s important to identify who are the people that are decision makers and influencers in your industry and in the environment in which you operate.

4) build your brand – look at ways to engage your clients with your brand specific to the market. Understand your brand personality at a corporate level but tailor it to your market. You can minimize risk in Latam and emerging markets by having a strong brand that connects to users on many different levels.

5) stay vigilant – empower your local team but stay vigilant of what is going on. Tapping into resources like your country/Embassy trade representative or local expertise can help you stay in tune with local developments. Ensure that vision, values and company policies are not compromised.

6) adapt the governance model – this is the final suggestion from the writers of the article and it’s something that Hipona Consulting strongly recommends whether your company operates internationally or locally. It’s about making sure that members of your board represent the diversity and dynamic characteristics of your company, stakeholders and market. Local board members or committees can help connect the company’s interests to local interests and at times can prove very valuable to getting ideas – and company vision – across.

EMC

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What is corporate governance?

Corporate Governance is more than just restoring or maintaining (public) confidence in a company; it’s about organizations making better decisions.

A few months ago I was in touch with a former colleague who I greatly admire – not only for his excellent management skills but also for the person that he is – kind, generous, honest and down to earth. We were talking about my consulting business and he asked me: “what is corporate governance”?

I realized that while many people (including very smart and skilled managers) might know that corporate governance relates to managing a corporation, they might not know exactly what it means. And it got me thinking that if more people know about corporate governance it might influence a shift towards creating more responsible and relevant organizations – especially those companies that we interact with as investors, employees, consumers, partners, etc.

Corporate governance to me, as a consultant, means helping boards (board of directors) make better decisions. It is a framework and a practice (within that framework) that ensures that corporate decisions benefit all stakeholders.

It is said that the introduction of the Sarbanes-Oxley Act in the US in 2002 ushered in a (renewed) interest in corporate governance because it was seen as a way to restore confidence in a “system”.

There is no doubt that corporate governance is a balancing act; organizations are good corporate citizens when they are not just concerned with profit but also short, medium and long term effects of their actions on the environment, community and their investors (including employees, suppliers, government etc.) It’s as much about PR as it is about internal controls, disclosure and performance management and compensation. For example, executive pay and benefits is a corporate governance issue if bonuses are tied to making short term decisions that could harm the organization. Such issues are kept in check by having an oversight committee or board of directors that examines executive actions, pay and risk.

So what does corporate governance mean to you? To me it means making sure that different voices are heard and that key decisions are not biased towards just making money or keeping a special interest group quiet. Corporate governance means that key decisions are made by taking into consideration different stakeholders in order to support the well-being of the entire organization.

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Why your business needs an advisory board

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An advisory board is easy to set up, fun to manage and can be valuable to you and your business: attracting expertise, innovation and credibility to your venture while providing a break from the isolation that sometimes comes from running your own business.

So what is an advisory board and how does it differ from a board of directors?
A board of directors is a group of seven to twelve individuals whose decisions and advice are legally binding and their participation in the business is formal and, in the case of for-profit businesses, financially compensated. An advisory board, on the other hand, is a group of two to five mentors who have been selected by a business owner to help them with business issues and to lend advice; advisors do not have the authority to vote or make decisions on behalf of the owner(s).

Is your business too small to have an advisory board?
Even a sole proprietorship can benefit from the insights and expertise of business mentors. Small businesses are especially well suited to having an advisory board because they help owners – who are passionate and driven to see their business and ideas succeed – access knowledge in areas they are less familiar with; whether it be financing, supplier relationships, marketing etc. Other benefits include:

1) Introductions to people who can help your business – a few timely introductions can benefit your business enormously and expand your professional network;
2) Credibility– from an outside perspective, your business gains credibility when you have reputable experts on board who are seen as guiding and helping you reach your business goals;
3) Objective analysis – whether it be advice on succession planning or an honest opinion on your financial projections, advisors can help you see the forest from the trees- or the trees in the forest!

Creating an Advisory Board
The key to creating an effective advisory board, both for you and for your advisors, is keeping it simple, balanced and transparent.

You can start by thinking of your business objectives and by writing down challenges you see in reaching those objectives. You can then turn the challenging areas into the short term objectives of the advisory board. This exercise can help you identify the type of advisors you need to meet your objectives.

There are a number of articles available online that tell you how to choose an advisor. It comes down to you and your business. Choose people that you know and trust and that complement your skill set. This doesn’t necessarily mean another designer or people in the design business. Sometimes the best advisors are those who have different industry expertise but can assist with specific business advice or experience in an area you might want to explore. You should consider inviting people whose opinion you can depend upon and who are not afraid to challenge you.

It’s important to be open and transparent at the beginning; describe your needs and the short term objectives of the advisory board. Set expectations regarding their time, how you will compensate them and the duration of their term as advisor to your business (twelve to twenty four months is common). You can find specific information from your local business association about these items but, in general terms, an advisor should be willing to help you out for free, meet with you a few times a year and should expect the reward of seeing you and your business succeed. Tackling these details at the beginning will ensure you and your advisors are expecting the same things; you can then minimize organizational details and maximize the relationship and expertise of your board advisor.

Advisory board meeting schedules are up to you and your advisors. Being that it is not a formal structure like a corporate board of directors, you can meet as a group or individually and when and where you want. Regardless of your meeting schedule, it is useful to keep in touch with your advisors regularly because this ensures that you don’t fall off their radar screens and you are able to benefit from timely expertise when you need it (even if you didn’t know you needed it!).

Be Open to Challenges
Small businesses are based on vision and entrepreneurial drive; they are about seeing an opportunity to create something valuable and useful for your clients. As entrepreneurs, you may agree with what I’m going to say about innovation; innovation is unexpected connections between things and advisory boards can make businesses more innovative. How? They create spaces for dialogue and support different points of view and diverse ways of doing things.

Having an advisory board means you are open to innovation in your business and to challenges that may include expanding your network, the product or service you offer, or even how people pay you. An advisory board lends you support as a person and as a business.

After experiencing the benefits of an advisory board, your next challenge may very well be joining an advisory board as a mentor in order to encourage innovation or help another business owner reach their full potential.

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International Women’s Day – Reflection

Today is International Women’s Day. I know many great women; some of them are in business, some in academia, some in politics, some are stay at home mums and most are a beautiful combination of all these things.

My post today is not to lament the fact that there are few women in management positions in the world (according to Deloitte only 4% of CEOs are women) or fewer serving on corporate boards of companies (in Italy, only 6 percent of board members are women; in Spain and Belgium, 11 percent; in Germany, 16 percent; in France, 22 percent) but rather a celebration of women and all that we can accomplish as professionals and leaders in our countries and communities and as wives, mothers, aunts, sisters, daughters and friends.

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Is Bigger Better?

When we are talking about corporate boards, maybe. In a recent study called “Corporate Board Attributes and Bankruptcy” by Harlan Platt and Marjorie Platt of Northeastern University, the authors suggest that boards that have members of different ages, members that are CEOs of other companies, members that start and end their board membership at different times, and an average of 9.96 members (rather than 8.89) are less likely to file for bankruptcy. So is bigger better, I would give a reserved yes.

Yes because I believe that each board member must contribute something to the strategic direction, financial health and ethical practices of the board and, by extension, the organization. Having 10 board members with 10 different perspectives is obviously better than having 9. My reservation is over having “dead weight” (excuse the frankness) on the board to fill quotas or to fill seats. There is also the much discussed issue of the ideal size of a group (answers vary from 5 to 12).

I would argue then that the answer to “Is Bigger Better?” in boardrooms and in other aspects of life, has more to do with quality than quantity.

I have been exploring the quota issue especially as it relates to diversity on boards. I have seen some excellent interviews by Lucy Marcus on this subject (see below). More on diversity in a later article.

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