Corporate Governance in the Knowledge Economy : Lessons From Case Studies in the Finance Sector

With the transition into the Knowledge Economy, a formidable series of new challenges arise within the corporate governance space. This book tackles the issue of corporate governance along two axes. Firstly, it confronts the developments in corporate governance within the context of the Knowledge Economy and all its implications in relation to the pre-eminence of intangible assets, the advent of technologies such as smartphones and advanced forms of artificial intelligence, and cultural changes associated with the incorporation of Gen Y into the workforce and the proliferation of social networks and effects such as Big Data and cyber-threats. Secondly, it highlights the challenges for multinational organizations and the tension that exists between headquarters and subsidiary offices due to the need to combine the corporation's ethical culture and corporate governance values with the institutional forces of the subsidiaries' context. The combination of these two axes addressed viz a viz the relationship between senior management and the rank and file of the organization to create an ethical corporate culture leads to a completely different positioning of corporate governance and make the book truly unique and of interest to researchers, students of corporate finance and corporate governance alongside practitioners within financial organizations and more broadly. Paul David Richard Griffiths is Academic Director of postgrads in Banking and Fintech at EM Normandie Business School, Metis Lab. He lectures on Fintech, Business Ethics & Governance, Banking Regulations, Knowledge Management, Data Visualisation and the Anglo-Saxon Financial System. Prior to becoming a full-time academic, Paul spent 20 years in leadership positions at global management consulting firms, serving Boards of blue-chip companies, particularly in the financial services sector. He specialises in management of intangible assets such as intellectual capital and related technologies such as artificial intelligence and Fintech. Paul's interests in research bridge across the fields of Fintech and knowledge management and the development of knowledge networks, particularly in banking. He holds a Master's degree in engineering; he has been a Humphrey Fellow (Fulbright Commission) at the University of Minnesota; and holds a doctorate in business administration. He is a prolific writer in professional and academic publications and a renowned speaker at conferences and seminars Contents List of Figures List of Tables 1 Introduction 2 Conceptual Framework: Corporate Responsibility, Governance, Business Ethics, Culture and the Knowledge Economy 2.1 Corporate Responsibility (CR) as a Framework for Corporate Governance 2.1.1 Adopting a Sustainable Business Strategy 2.1.2 Corporate Responsibility: A Framework 2.1.3 Stakeholders and Conflict of Interest 2.1.4 Sustainability Measurement 2.1.5 Making Things Happen: Sustainability Implementation 2.1.6 Focus on Corporate Governance 2.2 Corporate Governance, Business Ethics and Culture 2.2.1 Corporate Governance and Compliance 2.2.2 Business Ethics and Its Relationship to Corporate Governance 2.2.3 Doing Business in an International Context: Culture and Corruption 2.2.4 Creating an Ethical Culture in Banking 2.2.5 The Challenges in a World of Intangibles 2.3 The Knowledge Economy: From Physical Resources to Intangible Assets 2.3.1 Characteristics of the Knowledge Economy 2.3.2 Effect of Technology on the Knowledge Economy: Social Networks, Big Data, Artificial Intelligence 2.3.3 Cultural Change: Incorporating Generation Y as Consumers and Workers 2.3.4 Transparency and Reporting—Integrated Reporting 2.3.5 Bringing It All Together References 3 First Things First: The Hidden Cost of Poor Governance 3.1 Overview 3.2 Agents Putting Their Own Interest Ahead of the Corporation’s 3.2.1 Introduction 3.2.2 Factors in Selecting an RHQ 3.2.3 Approach 3.2.4 Data Analysis and Development of Location Comparison Criteria 3.2.4.1 Identification of Regional Hubs 3.2.4.2 Value Discipline of the RHQ 3.2.4.3 Definition of Relative Weights of Factors 3.2.5 Results 3.2.6 Discussion and Aftermath 3.2.7 Conclusions 3.3 The Devastating Effects That Weak Internal Controls Can Have 3.3.1 Introduction 3.3.2 The Company 3.3.3 Approach and Sources 3.3.4 The Incident 3.3.5 Root Causes of the Unethical Behaviour 3.3.6 Lessons Learnt 3.3.7 Looking Ahead 3.4 The Waste of Implementing Corporate Standards That the Staff Work Around 3.4.1 Introduction 3.4.2 Approach 3.4.3 The Role of Technology in Orica’s Latin American Business 3.4.4 The SAP Implementation Project Decision Process 3.4.5 Risk Management 3.4.6 Outcome of the SAP Implementation Project 3.4.7 Project Management Versus Governance 3.5 Lost Opportunities of Poor Corporate Governance Resulting in a Siloed Organisation 3.5.1 Introduction 3.5.2 The Situation 3.5.3 The Response 3.5.4 Implementation 3.5.5 Discussion 3.6 Cross-Case Analysis References 4 Challenges to Global Governance in MNE: Strategy Adaptation to Local Markets 4.1 Overview 4.2 IBM Argentina: Polycentricity in Practice 4.2.1 Overview of the Company 4.2.2 IBM Argentina in Its Context 4.2.3 The Governance Discussion 4.3 Sensible Governance: Global Standards in a High Context Approach 4.3.1 Overview 4.3.2 History of Nobleza Piccardo and Its Relationship to BAT 4.3.3 The Competitive Landscape 4.3.4 The Business Context 4.3.5 The Governance Discussion 4.4 Local Management Misalignment: A Governance Challenge 4.4.1 Background 4.4.2 Overview of Banco Santander in Chile 4.4.3 Banco Santander Santiago and Its Competitive Context 4.4.4 Value Discipline of the Organisation 4.4.5 The Governance Discussion 4.5 Cross-Case Analysis References 5 Challenges to Local Governance in International Business: The Risks of Corruption 5.1 Overview 5.2 Extortion: To Bribe, or Not Bribe? 5.2.1 Introduction 5.2.2 Context 5.2.3 Embedding Integrity in the Corporate Culture 5.2.4 Transaction Governance Capacity 5.2.5 Discussion 5.2.6 Conclusion 5.3 Laundering Drug Money: Rot from the Tail 5.3.1 Overview 5.3.2 The Organisation: HSBC 5.3.3 The Incident 5.3.4 The Money-Laundering Technique Applied Through HSBC Mexico 5.3.5 Discussion 5.3.6 Conclusions 5.4 Laundering Easy Money: Rot from the Head 5.4.1 The Bank 5.4.2 The Incident 5.4.3 Form of Money Laundering at Danske Bank 5.4.4 Discussion 5.4.5 Conclusions 5.5 Cross-Case Analysis References 6 To be or Not to be: Principles for Responsible Banking 6.1 Introduction to the Principles of Responsible Banking 6.1.1 Overview 6.1.2 History of Banks and the Climate Crisis 6.2 Drivers for Adoption 6.2.1 Citibank 6.2.2 Mitsubishi UFJ Financial Group (MUFG) 6.2.3 Industrial and Commercial Bank of China Ltd (ICBC) 6.3 Reasons to Refrain from Adopting 6.3.1 JP Morgan Chase 6.3.2 HSBC 6.3.3 Wells Fargo 6.3.4 Synthesis of Reasons to Refrain from Signing 6.4 Operational Challenges 6.4.1 The Long Tail of Environmental Sustainability 6.4.2 The Way Forward References 7 The Future of Corporate Governance 7.1 Overview 7.2 Lessons on the Status of Corporate Governance 7.3 Uncovering the Window: Where Is Corporate Governance Heading? 7.3.1 Introduction to Scenario Planning 7.3.2 Scenario Structure No. 1 7.3.3 Scenario Structure No. 2 7.3.4 Scenario Structure No. 3 Reference 8 Final Reflections and Concluding Remarks Index With the transition into the Knowledge Economy, a formidable series of new challenges arise within the corporate governance space. This book tackles the issue of corporate governance along two axes. Firstly, it confronts the developments in corporate governance within the context of the Knowledge Economy and all its implications in relation to the pre-eminence of intangible assets, the advent of technologies such as smartphones and advanced forms of artificial intelligence, and cultural changes associated with the incorporation of Gen Y into the workforce and the proliferation of social networks and effects such as Big Data and cyber-threats. Secondly, it highlights the challenges for multinational organizations and the tension that exists between headquarters and subsidiary offices due to the need to combine the corporation's ethical culture and corporate governance values with the institutional forces of the subsidiaries context. The combination of these two axes addressed viz a viz the relationship between senior management and the rank and file of the organization to create an ethical corporate culture leads to a completely different positioning of corporate governance and makes the book truly unique and of interest to researchers, students of corporate finance and corporate governance alongside practitioners within financial organizations and more broadly. Paul David Richard Griffiths is Academic Director of postgrads in Banking and Fintech at EM Normandie Business School, Metis Lab. He lectures on Fintech, Business Ethics & Governance, Banking Regulations, Knowledge Management, Data Visualisation and the Anglo-Saxon Financial System. Prior to becoming a full-time academic, Paul spent 20 years in leadership positions at global management consulting firms, serving Boards of blue-chip companies, particularly in the financial services sector. He specialises in management of intangible assets such as intellectual capital and related technologies such as artificial intelligence and Fintech. Paul's interests in research bridge across the fields of Fintech and knowledge management and the development of knowledge networks, particularly in banking. He holds a Masters degree in engineering; he has been a Humphrey Fellow (Fulbright Commission) at the University of Minnesota; and holds a doctorate in business administration. He is a prolific writer in professional and academic publications and a renowned speaker at conferences and seminars