Introduction to corporate governance
KU LEUVEN x Deloitte.
Key contacts Deloitte
- Nico Houthaeve
- Helena Callens
Key contacts KU Leuven
- Prof Ann Gaeremynck
- Jasmijne Vandenberk
,Table of Contents
1. Introduction to corporate goverance .............................................................. 6
1992…...................................................................................................................................... 6
Holding the balance .................................................................................................................. 6
1. Corporate Governance ............................................................................................ 7
Why Corporate Governance? – Definition ................................................................................. 7
What is Corporate Governance? ............................................................................................... 7
Stakeholders............................................................................................................................. 7
Regulation ................................................................................................................................ 8
Key concepts ............................................................................................................................ 8
Legislation – overview ............................................................................................................... 8
What is the CG Code 2020 about?........................................................................................ 9
Main changes between the Code 2009 & the new Code 2020 ............................................... 9
Legal framework for non-listed companies ...............................................................................10
Code Buysse III (2017) ........................................................................................................10
2. Basic principles ..................................................................................................... 11
2.1. Board of directors..............................................................................................................11
Code 2020 ...........................................................................................................................12
2.2. CEO and management committee.....................................................................................12
CEO ....................................................................................................................................13
Management committee ......................................................................................................14
2.3. Who decides what? ...........................................................................................................14
2.4. Dualistic board structure....................................................................................................16
Two-tier board structure .......................................................................................................16
Key take-aways ...................................................................................................................16
Information ..........................................................................................................................16
3. Ethical behavior ..................................................................................................... 17
3.1. The Theranos Case ..........................................................................................................17
In the beginning (2003) ........................................................................................................17
The Edison ..........................................................................................................................17
The breakthrough ................................................................................................................18
The growth ..........................................................................................................................18
Board of directors ................................................................................................................18
The culture ..........................................................................................................................18
The criticism (2015) & the end .............................................................................................19
Governance questions .........................................................................................................19
3.2. The Technoboost case......................................................................................................20
Background .........................................................................................................................20
2. Corporate governance bodies ....................................................................... 22
1. Corporate Governance Stakeholders ................................................................... 22
1.1 Shareholders .....................................................................................................................22
Different types .....................................................................................................................22
SMEs ..............................................................................................................................22
Family shareholder ..........................................................................................................24
Professional investor .......................................................................................................24
Minority shareholder ................................................................................................................24
Private equity shareholder .......................................................................................................24
Institutional investor .................................................................................................................24
Non-profit organization ....................................................................................................25
Government ....................................................................................................................25
Financial institutions ........................................................................................................26
1.2 Board of Directors ..............................................................................................................27
Composition ........................................................................................................................27
Case ...............................................................................................................................28
Independent director........................................................................................................28
Diversity quota ................................................................................................................30
2
, Culture ................................................................................................................................34
Business Chemistry .........................................................................................................34
2. Operations of the board of directors .................................................................... 35
1. The BoD meeting ............................................................................................................35
Frequency ...........................................................................................................................35
Running an effective board meeting .....................................................................................36
2. The Agenda of the board directors ...................................................................................36
3. Decision-making ..............................................................................................................37
Starting points .....................................................................................................................37
4. Culture & dynamics .........................................................................................................37
Starting points .....................................................................................................................37
Role of the Chairman of the Board of Directors ....................................................................38
Role of the individual director ...............................................................................................38
5. Information flow ...............................................................................................................38
Starting points .....................................................................................................................38
Focus points ........................................................................................................................38
Perspective of the directors..................................................................................................39
Tips for directors’ points .......................................................................................................39
6. Renumeration ..................................................................................................................39
Code 2020 ...........................................................................................................................39
7. Evaluation of the board of directors..................................................................................40
Why an evaluation of the Board of Directors?.......................................................................40
What techniques can be used for this purpose? ...................................................................40
3. Board committees ................................................................................................. 41
3.1 Audit committee ..........................................................................................................41
3.2 Remuneration committee.............................................................................................42
3.3 Nomination committee .................................................................................................44
4. Reporting ............................................................................................................... 45
4.1 Corporate Governance statement ................................................................................45
4.2 Remuneration report ...................................................................................................45
5. Internal audit .......................................................................................................... 46
5.1 Introduction .................................................................................................................46
What is Internal Audit? – Definition ......................................................................................47
Different types .....................................................................................................................48
Internal vs. External Audit ....................................................................................................48
5.2 IA in practice ...............................................................................................................49
Important principles of risk & control ....................................................................................49
Assessing controls means looking form different angles .......................................................49
Control types .......................................................................................................................50
Ineffective control & overcontrol ...........................................................................................50
6. External audit ......................................................................................................... 51
6.1 Introduction to the audit process ..................................................................................51
6.2 Reporting to those charged with governance...................................................52
The OpenAI case .................................................................................................... 53
Hot topics – Recent developments....................................................................... 55
1. 4th industrial revolution: Digital & cognitive technologies.................................. 55
Industry 4.0 is driven by digital and cognitive technologies .......................................................55
Transformative Power industry 4.0 ...........................................................................................55
Board’s Eye View of Industry 4.0..............................................................................................55
Long-term value creation .........................................................................................................55
2. Purpose .................................................................................................................. 56
Purpose is a key differentiator for businesses today .................................................................56
Shift towards more sustainable value creation! .........................................................................57
The rise of the social enterprise! ..............................................................................................57
3
, 3. Sustainability ......................................................................................................... 57
Our understanding of the sustainability context and urgency ....................................................57
Board’s role in evolving towards a sustainable company ..........................................................57
Corporate Governance Code 2020...........................................................................................58
4. Governance in a non-public environment .................................................... 59
Family Business Dynamics - Governance – CoE (Deloitte Belgium)......................... 59
Perspectives on Boards/Directors ............................................................................... 59
The board of Open AI: Adam D’Angelo, Helen Toner, Ilya Sutskever and Tasha
McCauley ....................................................................................................................... 60
‘Why would I need a board?’ ........................................................................................ 60
Governance & BoD........................................................................................................ 60
Dynamics in governance of family business............................................................... 60
High-Performing Top Team .......................................................................................... 60
Top Team: Growing in Maturity .................................................................................... 61
Boost your EQ in the Boardroom ................................................................................. 61
Drivers to Quality in Top Team Decision Making ........................................................ 62
Beware of the boss: the Dark Triad.............................................................................. 62
What about conflict culture in the board? ................................................................... 63
5. The impact of digitalization ............................................................................ 64
5.1 Digital in the boardroom ......................................................................................... 64
Introduction..............................................................................................................................64
Industry 4.0..............................................................................................................................64
Atlas Copco .........................................................................................................................64
Role of the Board .....................................................................................................................64
Exercising oversight of digital innovation ..................................................................................65
Action plan for the board ..........................................................................................................66
Exercising oversight of digital innovation ..................................................................................66
5.2 Digital & analytics in finance & audit ..................................................................... 67
5.2.1 Digitalization ...................................................................................................................67
Use of analytics ...................................................................................................................67
Breaking boundaries ............................................................................................................67
5.2.2 Audit digitalization ...........................................................................................................67
Audit transformation.............................................................................................................67
In-class discussion ..............................................................................................................68
Hot topic: Blockchain ...........................................................................................................68
Use cases .......................................................................................................................69
Example ..........................................................................................................................69
5.2.3 The auditor’s digital toolkit ...............................................................................................69
Audit transformation.............................................................................................................69
Analytics..........................................................................................................................70
Coordination portal ..........................................................................................................70
AI-based risk sensing ......................................................................................................71
Guided risk assessment ..................................................................................................71
AI - Machine learning .......................................................................................................71
Drones ............................................................................................................................72
Process analysis .............................................................................................................72
RPA ................................................................................................................................72
5.3 Digital cases ............................................................................................................ 72
6. Trends & Evolutions ....................................................................................... 73
4
KU LEUVEN x Deloitte.
Key contacts Deloitte
- Nico Houthaeve
- Helena Callens
Key contacts KU Leuven
- Prof Ann Gaeremynck
- Jasmijne Vandenberk
,Table of Contents
1. Introduction to corporate goverance .............................................................. 6
1992…...................................................................................................................................... 6
Holding the balance .................................................................................................................. 6
1. Corporate Governance ............................................................................................ 7
Why Corporate Governance? – Definition ................................................................................. 7
What is Corporate Governance? ............................................................................................... 7
Stakeholders............................................................................................................................. 7
Regulation ................................................................................................................................ 8
Key concepts ............................................................................................................................ 8
Legislation – overview ............................................................................................................... 8
What is the CG Code 2020 about?........................................................................................ 9
Main changes between the Code 2009 & the new Code 2020 ............................................... 9
Legal framework for non-listed companies ...............................................................................10
Code Buysse III (2017) ........................................................................................................10
2. Basic principles ..................................................................................................... 11
2.1. Board of directors..............................................................................................................11
Code 2020 ...........................................................................................................................12
2.2. CEO and management committee.....................................................................................12
CEO ....................................................................................................................................13
Management committee ......................................................................................................14
2.3. Who decides what? ...........................................................................................................14
2.4. Dualistic board structure....................................................................................................16
Two-tier board structure .......................................................................................................16
Key take-aways ...................................................................................................................16
Information ..........................................................................................................................16
3. Ethical behavior ..................................................................................................... 17
3.1. The Theranos Case ..........................................................................................................17
In the beginning (2003) ........................................................................................................17
The Edison ..........................................................................................................................17
The breakthrough ................................................................................................................18
The growth ..........................................................................................................................18
Board of directors ................................................................................................................18
The culture ..........................................................................................................................18
The criticism (2015) & the end .............................................................................................19
Governance questions .........................................................................................................19
3.2. The Technoboost case......................................................................................................20
Background .........................................................................................................................20
2. Corporate governance bodies ....................................................................... 22
1. Corporate Governance Stakeholders ................................................................... 22
1.1 Shareholders .....................................................................................................................22
Different types .....................................................................................................................22
SMEs ..............................................................................................................................22
Family shareholder ..........................................................................................................24
Professional investor .......................................................................................................24
Minority shareholder ................................................................................................................24
Private equity shareholder .......................................................................................................24
Institutional investor .................................................................................................................24
Non-profit organization ....................................................................................................25
Government ....................................................................................................................25
Financial institutions ........................................................................................................26
1.2 Board of Directors ..............................................................................................................27
Composition ........................................................................................................................27
Case ...............................................................................................................................28
Independent director........................................................................................................28
Diversity quota ................................................................................................................30
2
, Culture ................................................................................................................................34
Business Chemistry .........................................................................................................34
2. Operations of the board of directors .................................................................... 35
1. The BoD meeting ............................................................................................................35
Frequency ...........................................................................................................................35
Running an effective board meeting .....................................................................................36
2. The Agenda of the board directors ...................................................................................36
3. Decision-making ..............................................................................................................37
Starting points .....................................................................................................................37
4. Culture & dynamics .........................................................................................................37
Starting points .....................................................................................................................37
Role of the Chairman of the Board of Directors ....................................................................38
Role of the individual director ...............................................................................................38
5. Information flow ...............................................................................................................38
Starting points .....................................................................................................................38
Focus points ........................................................................................................................38
Perspective of the directors..................................................................................................39
Tips for directors’ points .......................................................................................................39
6. Renumeration ..................................................................................................................39
Code 2020 ...........................................................................................................................39
7. Evaluation of the board of directors..................................................................................40
Why an evaluation of the Board of Directors?.......................................................................40
What techniques can be used for this purpose? ...................................................................40
3. Board committees ................................................................................................. 41
3.1 Audit committee ..........................................................................................................41
3.2 Remuneration committee.............................................................................................42
3.3 Nomination committee .................................................................................................44
4. Reporting ............................................................................................................... 45
4.1 Corporate Governance statement ................................................................................45
4.2 Remuneration report ...................................................................................................45
5. Internal audit .......................................................................................................... 46
5.1 Introduction .................................................................................................................46
What is Internal Audit? – Definition ......................................................................................47
Different types .....................................................................................................................48
Internal vs. External Audit ....................................................................................................48
5.2 IA in practice ...............................................................................................................49
Important principles of risk & control ....................................................................................49
Assessing controls means looking form different angles .......................................................49
Control types .......................................................................................................................50
Ineffective control & overcontrol ...........................................................................................50
6. External audit ......................................................................................................... 51
6.1 Introduction to the audit process ..................................................................................51
6.2 Reporting to those charged with governance...................................................52
The OpenAI case .................................................................................................... 53
Hot topics – Recent developments....................................................................... 55
1. 4th industrial revolution: Digital & cognitive technologies.................................. 55
Industry 4.0 is driven by digital and cognitive technologies .......................................................55
Transformative Power industry 4.0 ...........................................................................................55
Board’s Eye View of Industry 4.0..............................................................................................55
Long-term value creation .........................................................................................................55
2. Purpose .................................................................................................................. 56
Purpose is a key differentiator for businesses today .................................................................56
Shift towards more sustainable value creation! .........................................................................57
The rise of the social enterprise! ..............................................................................................57
3
, 3. Sustainability ......................................................................................................... 57
Our understanding of the sustainability context and urgency ....................................................57
Board’s role in evolving towards a sustainable company ..........................................................57
Corporate Governance Code 2020...........................................................................................58
4. Governance in a non-public environment .................................................... 59
Family Business Dynamics - Governance – CoE (Deloitte Belgium)......................... 59
Perspectives on Boards/Directors ............................................................................... 59
The board of Open AI: Adam D’Angelo, Helen Toner, Ilya Sutskever and Tasha
McCauley ....................................................................................................................... 60
‘Why would I need a board?’ ........................................................................................ 60
Governance & BoD........................................................................................................ 60
Dynamics in governance of family business............................................................... 60
High-Performing Top Team .......................................................................................... 60
Top Team: Growing in Maturity .................................................................................... 61
Boost your EQ in the Boardroom ................................................................................. 61
Drivers to Quality in Top Team Decision Making ........................................................ 62
Beware of the boss: the Dark Triad.............................................................................. 62
What about conflict culture in the board? ................................................................... 63
5. The impact of digitalization ............................................................................ 64
5.1 Digital in the boardroom ......................................................................................... 64
Introduction..............................................................................................................................64
Industry 4.0..............................................................................................................................64
Atlas Copco .........................................................................................................................64
Role of the Board .....................................................................................................................64
Exercising oversight of digital innovation ..................................................................................65
Action plan for the board ..........................................................................................................66
Exercising oversight of digital innovation ..................................................................................66
5.2 Digital & analytics in finance & audit ..................................................................... 67
5.2.1 Digitalization ...................................................................................................................67
Use of analytics ...................................................................................................................67
Breaking boundaries ............................................................................................................67
5.2.2 Audit digitalization ...........................................................................................................67
Audit transformation.............................................................................................................67
In-class discussion ..............................................................................................................68
Hot topic: Blockchain ...........................................................................................................68
Use cases .......................................................................................................................69
Example ..........................................................................................................................69
5.2.3 The auditor’s digital toolkit ...............................................................................................69
Audit transformation.............................................................................................................69
Analytics..........................................................................................................................70
Coordination portal ..........................................................................................................70
AI-based risk sensing ......................................................................................................71
Guided risk assessment ..................................................................................................71
AI - Machine learning .......................................................................................................71
Drones ............................................................................................................................72
Process analysis .............................................................................................................72
RPA ................................................................................................................................72
5.3 Digital cases ............................................................................................................ 72
6. Trends & Evolutions ....................................................................................... 73
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