Page 184 - DCOM106_COMPANY_LAW

Unit 11: Corporate Governance

Information and IT Assets: Digitized data, information, and knowledge about customers, Notes
processes performance, finances, information systems, and so on.
Relationship Assets: Relationships within the enterprises as well as relationships, brand,
and reputation with customers, suppliers, business units, regulators, competitors, channel
partners, and so on.

Governance of the key assets occurs via a large number of organizational mechanisms. Some
mechanisms are unique to a particular asset (for example, the IT architecture committee) and
others cross and integrate multiple asset types ensuring synergies between key assets. Maturity
across the governance of the six key assets varies significantly in most enterprises today with
financial and physical assets typically the best governed and information assets among the
worst.
At the bottom of figure 11.1 are the mechanisms used to govern each of the six key assets. It is
contended that enterprises with common mechanisms across multiple assets perform better.
For example, if the same executive committee governs both financial and IT assets, a firm can
achieve better integration and create more value. Some mechanisms will always be unique to
each asset the audit committee for financial assets and the IT architecture committee for example,
but some common mechanisms lead to better coordination of the six assets.
As a sobering exercise, quickly jot down the list of mechanisms used in your enterprise to
govern each of the six assets. Could you complete the lists? How many of the mechanisms were
common across more than one asset more than two assets? Coordinating the six key assets of an
enterprise is not easy. The average assessment of a group of forty-two CIOs on how well their
enterprises integrated IT governance with the governance of the other key assets was less than
three on a five point scale. Creating common governance mechanisms across the assets will not
increase integration but the resulting smaller number of mechanisms will be simpler to
communicate and implement. Education of the senior management team about how governance
mechanisms combine to work for the enterprise is an essential and ongoing task for effective
governance. We contend that many tangible benefits await better IT governance.
Self Assessment

Fill in the blanks:
1. Corporate governance includes the relationships among the many players involved and
the .......................................
2. ................................... 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.
3. A McKinsey study found that ........................................ are even prepared to pay large
premiums for investments in firms with high governance standards.

4. .............................. are different in every enterprise.

11.2 Corporations as Social Entity

A corporation, though producing and distributing goods and services, is not just an economic
and legal entity. No doubt, society is dependent upon corporations for the supply of goods and
services but they cannot ignore the social consequences of their overall activities. In fact, a
corporation, in addition to being an economic entity, is also a social entity. This fact is nowadays
recognized beyond doubt and social implications of working of corporations are studied with
keen interest. Every business corporation operates within a certain kind of social environment.

LOVELY PROFESSIONAL UNIVERSITY 179