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Beyond the Shareholder Model of Corporate Governance Sue Konzelmann Marc Fovargue-Davies German Heufemann Paula Ramos Sanchez 2008 SASE Meetings, San Jose,

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Presentation on theme: "Beyond the Shareholder Model of Corporate Governance Sue Konzelmann Marc Fovargue-Davies German Heufemann Paula Ramos Sanchez 2008 SASE Meetings, San Jose,"— Presentation transcript:

1 Beyond the Shareholder Model of Corporate Governance Sue Konzelmann Marc Fovargue-Davies German Heufemann Paula Ramos Sanchez 2008 SASE Meetings, San Jose, Costa Rica

2 Session Overview Beyond the Shareholder Model The London Centre for Corporate Governance and Ethics (LCCGE) Unfolding cases –State Owned Enterprises in Chile –Global responses to the Burmese conflict Wrap-up & Discussion

3 The dominant model External forms of governance & the strengthening of shareholder protection –Global proliferation of voluntary codes –The market for corporate control & the marginalization of mechanisms for voice Internal forms of governance & stakeholder relationships Potential conflicts in approach

4 Beyond the Shareholder Model … Corporate governance & management –The logic of production: Co-operation –The management of production –The centrality of commitment Unitary vs pluralistic organizations –Legitimacy of mutual & conflicting interests

5 Corporate governance & organizational performance Corporate governance & stakeholder relations –Dominant stakeholders: external v internal Is there a CG constraint on management in the shareholder model? Prioritizing shareholder interests & long- term organizational performance

6 Summary The conflicting logic of markets & the management of production –The logic of the market in corporate governance –Corporate governance & the logic of production –Resolving the conflict Conflicting theories of governance Complementarity of production & trade Agenda for Reform –Protecting vulnerable stakeholders –Globalization & effective regulation

7 A New Approach: The London Centre for Corporate Governance and Ethics Marc Fovargue-Davies 2008 SASE Meetings, San José, Costa Rica

8 Origins of the LCCGE Is there really a need for another research centre? Who proposed the idea? –Birkbeck PG & PhD students/graduates in CG&BE –commitment to organizational effectiveness & academic development –Diversity of nationality & background Key aim of LCCGE –To provide a forum for cutting edge academic research and the development of practical approaches to new & developing governance challenges

9 LCCGE Approach A global network –A global environment requires a governance framework to operate on a scale to match An organic network, with a collective approach and a view to providing a more stable future, is quicker to develop, more adaptive and potentially more influential. This would create an environment where ideas can be shared, developed and evaluated. The LCCGE would be a member of this network

10 LCCGE approach No inbuilt allegiance to any one model - the network will always look for better thinking Longer term view Additional factors to take into account –Variability in stakeholder influence –Heterogeneity of stakeholder interests –Schizophrenia within stakeholder groups –The empowered & connected consumer –Ever increasing mobility of capital & production Strategic Options beyond the pursuit of share price appreciation

11 Applying new thinking Combining academic research with real world experience (frequently in the same individual) produces practical outcomes for organisations. The next part of the session looks at some of the strategic options resulting from the dynamic and complex nature of the stakeholder groups. Analysis of currently unfolding cases is presented by LCCGE members who are PG students in CG&BE

12 State Owned Enterprises in Chile Germán Heufemann 2008 SASE Meetings, San José, Costa Rica

13 Scale and scope of SOEs Impact of SOEs on economic performance Key players in strategic sectors Defense, transport, water supply, telecommunications, and banking State remains as a relevant owner of productive assets for economic and political reasons Privatisation is not always the best alternative

14 Governance rationale in SOEs Specific governance challenges –Soft budget constraints, complex agency chain & common agency Absence of external forms of governance –No market for corporate control, potential take-overs, possibilities to go bankrupt –Incomplete shareholder model governance in SOEs Potential benefits of co-operation among corporate stakeholders

15 SOEs and the Ownership Entity in Chile

16 Ensure a level-playing field with the private sector Ownership function within the State administration Transparency of SOEs objectives and performance Strengthen and empower SOE boards Provide equitable treatment of non-controlling minority shareholders SOEs and the Ownership Entity in Chile

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18 Conclusions Corporate governance practices in Chilean SOEs are in a stage of risk mitigation Incomplete shareholder model of governance as an opportunity to develop a co-operative approach in SOEs Agenda for Reform –Protecting vulnerable non-controlling minority shareholders in SOEs –Increase enforceability of the SEP Code –Improve and formalize the process of consultation and co-operation among SOEs and the ownership entity

19 Global Responses to the Burmese Conflict Paula Ramos Sanchez & Sarah Yeh 2008 SASE Meetings, San José, Costa Rica

20 Political & economic context Political context –Military rule since 1962 –Military government has resisted all efforts at democratisation Economic context –Rich in natural resources but 75% of population living below the poverty line –May 2008: Cyclone Nargis Governments refusal of foreign aid Absence of effective governance at all levels

21 Consequences of economic & political mis-management Approx 50% annual budget spent on armed forces –Military repression through regime of terror Approx 8% annual budget spent on education –No freedom of speech, press, assembly, association, religion or movement Approx 3% annual budget spent on health –Widespread AIDS & TB

22 International Responses (positive) National Governments International Institutions Corporations Unions NGOs Universities Investors Consumers Religious groups

23 International Responses (negative) National Governments Corporations Investors Consumers

24 Consequences of the piecemeal response The conflict continues No consensus on a way forward Absence of new approaches to governance at different levels –Local, national, global –Individual, corporate Would a more coordinated approach make a difference?

25 Wrap-Up Sue Konzelmann, Director LCCGE, Director PG Management Programmes, Director PG Programmes in Corporate Governance & Business Ethics Marc Fovargue-Davies, Assistant Director, LCCGE Germán Heufemann, MSc CG&BE & LCCGE Paula Ramos Sanchez, MSc CG&BE & LCCGE (


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