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    Sustainability Governance and Management
    Sustainability Governance and Management
    Sustainability Governance and Management
    Ebook1,100 pages14 hours

    Sustainability Governance and Management

    By Alan S. Gutterman

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    About this ebook

    Corporate social responsibility ("CSR") is like any other important management initiative and requires proactive leadership from the top of the organization.  In fact, it is clear that the "tone at the top" is an important factor in the success or failure of any CSR initiative and that the directors, executive officers and senior managers of the organization are uniquely positioned to act as internal champions of CSR and proactively communicate with everyone in the organization on a daily basis about the impact of new environmental and social products, services and activities (e.g., philanthropic projects) and CSR-related systems and processes.  These leaders must also commit to investing the time and effort necessary to explain the organization's CSR initiatives to clients and customers and other stakeholders and develop and implement appropriate metrics for tracking and reporting progress.  At the same time, while CSR certainly extends "beyond the law", directors and officers must remain mindful of their traditional fiduciary duties and understand how laws, regulations and standard contract provisions are rapidly evolving to incorporate environmental and social responsibility standards. 

    CSR has changed the playbook for organizational governance, leadership and management.  Among the issues and activities that will need to be considered in establishing and maintaining effective governance and management processes for CSR implementation include understanding how CSR is changing the traditional fiduciary duties of directors and officers including the ascendance of the stakeholder-focused model and the introduction of alternative legal architectures for sustainability-oriented businesses; ensuring that the board of directors integrates environmental and social responsibility into the governance structure and the traditional roles and responsibilities of directors; designing and implementing an effective framework for board oversight of CSR and corporate sustainability; developing and implementing internal governance instruments—codes, policies and procedures—to guide organizational members on their CSR-related duties and responsibilities and provide a foundation for decision making; designing effective internal organizational structures and systems for managing CSR initiatives and programs and supporting CSR commitments and expectations such as preparation and distribution of sustainability reports and stakeholder engagement; integrating CSR into the duties and responsibilities of the chief executive officer and other members of the C-suite team, as well as into their compensation arrangements, and developing job responsibilities for a new breed of sustainability executives; and identifying and counseling directors, officers, managers and employees on ethical issues that will arise as they discharge their responsibilities with respect to CSR and work to enhance and maintain the reputation of the organization.

    CSR requires organizations to look beyond traditional economic performance to consider the impact of their activities on the environment and society in which they operate and on stakeholders other than the owners of the organization; however, pursuit of CSR relies on many of the same basic governance and management processes that have been developed in the business world (e.g., planning, acquiring and deploying resources, building products and systems and monitoring execution of day-to-day operations).  At the same time, the emergence of CSR has fueled interest in new skill sets including sustainable leadership and ethical management.  This book is intended to provide sustainable entrepreneurs with a comprehensive guide to governing, leading and managing a successful sustainability-focused business.

    LanguageEnglish
    PublisherSustainable Entrepreneurship Project
    Release dateAug 4, 2019
    ISBN9781393389415
    Sustainability Governance and Management
    Author

    Alan S. Gutterman

    This book was written by Alan S. Gutterman, whose prolific output of practical guidance for legal and financial professionals, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 80 books on sustainable entrepreneurship, leadership and management, business transactions, international business and technology management for a number of publishers including Thomson Reuters, Practical Law, Kluwer, Oxford, Quorum, ABA Press, Aspen, Euromoney, Business Expert Press, Harvard Business Publishing and BNA.  Alan has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions and strategic business alliances, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Berkeley Law, Santa Clara University and the University of San Francisco, teaching classes on corporate finance, venture capital and law and economic development,  He has also launched and oversees projects relating to sustainable entrepreneurship and ageism.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com.

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      Book preview

      Sustainability Governance and Management - Alan S. Gutterman

      1

      Governance, Leadership and Management

      Corporate social responsibility (CSR) is like any other important management initiative and requires proactive leadership from the top of the organization.  In fact, it is clear that the tone at the top is an important factor in the success or failure of any CSR initiative and the directors, executive officers and senior managers of the corporation are uniquely positioned to act as internal champions of CSR and proactively communicate with everyone in the organization on a daily basis about the impact of new environmental and social products, services and activities (e.g., philanthropic projects) and CSR-related systems and processes.  These organizational leaders must also commit to investing the time and effort necessary to explain the corporation’s CSR initiatives to customers and other stakeholders and develop and implement metrics for tracking and reporting progress.  While CSR certainly extends beyond the law, directors and officers must be mindful of their fiduciary duties and understand how laws, regulations and standard contract provisions are rapidly evolving to incorporate environmental and social responsibility standards. 

      Among the issues and activities that will need to be considered in establishing and maintaining effective governance and management processes for CSR implementation are the following:

      Understanding the drivers of enhanced board oversight of sustainability including investors’ expectations as to the role and responsibilities of directors and changing societal beliefs regarding the political and social roles of corporations

      Understanding how CSR is changing the traditional fiduciary duties of directors and officers including the ascendance of the stakeholder-focused model and the introduction of alternative legal architectures for sustainability-oriented businesses

      Ensuring that the board of directors integrates environmental and social responsibility into the governance structure and the traditional roles and responsibilities of directors

      Designing and implementing of an effective framework for board oversight of CSR and corporate sustainability

      Development and implementation of CSR commitments and instruments under the authority and supervision of the directors and senior management

      Incorporating reports on CSR initiatives into board meetings and understanding how to create effective environmental and social responsibility committees and integrate sustainability into the activities of other board committees

      Developing and maintaining a sustainability-supportive organizational culture

      Developing job responsibilities for the senior social responsibility officer and designing effective internal organizational structures and systems for managing CSR initiatives and programs and supporting CSR commitments and expectations such as preparation and distribution of sustainability reports and stakeholder engagement

      Implementing formal management systems relating to sustainability-related issues such as the environment; social responsibility and supply chain security including processes for collecting and analyzing information to assess CSR performance

      Reviewing and modifying job responsibilities and compensation arrangements of executive team members, particularly the chief executive officer, to incorporate CSR commitments and attainment of CSR-related performance goals

      Providing education and training to directors and executive team members on sustainability issues including the creation and management of stakeholder advisor groups and teams of external experts

      Supporting directors, executive team members and managers and employees within the internal sustainability group to carry out their roles with respect to key CSR-related activities such as transparency and disclosure and stakeholder engagement

      Identifying and counseling directors, officers, managers and employees on ethical issues that will arise as they discharge their responsibilities with respect to CSR and work to enhance and maintain the reputation of the organization

      Conducting continuous audits and assessments of the sustainability governance and management framework through the use of certification and rating systems in order to evaluate and improve CSR performance and effectiveness

      CSR requires organizations to look beyond traditional economic performance to consider the impact of their activities on the environment and society in which they operate; however, pursuit of CSR relies on many of the same basic governance and management processes that have been developed in the business world.  As such, this initial chapter of a publication which is dedicated to sustainability governance and management takes a moment to introduce several fundamental topics that need to be understood by directors, executive officers, senior managers and employees: governance, leadership and management.  While considered separately, the topics are closely related and overlapping.  In fact, as discussed below, there is debate about how best to distinguish leadership and management.  In addition, one of the most important jobs of the members of the governance group, the board of directors in the case of a corporation, is selecting the management team, providing them with directions and monitoring and evaluating how the skills and actions of the managers (e.g., planning, acquiring and deploying resources, building products and systems and monitoring execution of day-to-day operations) have contributed to achievement of the overall goals and objectives set by the governance group. 

      Leadership plays a role for both governance and management processes: the directors interact with the various stakeholders of the organization to understand their interests in organizational performance and then provide the executive officers and senior managers with goals and purposes and those officers and managers are then expected to lead their respective teams and influence their team members to comply with the policies and systems approved by the directors.  In a properly functioning governance and management process, all of the players are ultimately accountable for their actions.  Executive officers and senior managers are accountable to the directors for executing the directors’ instructions regarding overall goals and objectives for the organization.  As for the directors, they are accountable to the ultimate beneficiaries of the organization’s activities.  For a long time, director accountability was limited to the owners of the organization (i.e., the shareholders in the case of a corporation); however, as discussed below and elsewhere in this publication, directors must now answer to a range of stakeholders.  The emergence of CSR has also spawned new skill sets including sustainable leadership and ethical management, each of which are discussed at length in separate chapters in this publication.

      Corporate Governance

      Corporate governance can be thought of as the way in which corporations are directed, administered and controlled and the actual activities of the directors and senior executives, the persons responsible for the governance and management of the corporation, have been referred to as steering, guiding and piloting the corporation through the challenges that arise as it pursues its goals and objectives. Jamali et al. explained that the control aspect of corporate governance encompassed the notions of compliance, accountability, and transparency, and how managers exert their functions through compliance with the existing laws and regulations and codes of conduct.[1]  At the board level, the focus is on leadership and strategy and directors are expected to deliberate, establish, monitor and adjust the corporation’s strategy, determine and communicate the rules by which the strategy is to be implemented, and select, monitor and evaluate the members of the senior executive team who will be responsible for the day-to-day activities associated with the strategy.  In addition, directors are expected to define roles and responsibilities, orient management toward a long-term vision of corporate performance, set proper resource allocation plans, contribute know-how, expertise, and external information, perform various watchdog functions, and lead the firm’s executives, managers and employees in the desired direction.[2]

      Corporate governance has been a matter of intense focus and debate for public companies over the last few years and a wide array of new statutes and regulations have been adopted that impact fiduciary obligations of directors and officers to shareholders; the composition and responsibilities of the audit and other committees of the board of directors; and the duties of professional advisor to public companies, notably accountants and lawyers.  While this has created additional expense and risk for public companies it has also raised the bar for privately-held emerging companies that are now expected to set and meet higher standards with respect to internal controls and ensuring the appropriate compliance and risk management programs have been implemented and followed.  Corporate governance does demand investment of significant resources, including the time and attention of senior management; however, the effort can pay substantial dividends in terms of employee morale and creating a position impression and reputation in the investment community and among the consumers of the company’s products and services.

      The importance of corporate governance for companies and countries all around the world has been succinctly summarized as follows in a United Nations publication:

      In a more globalized, interconnected and competitive world, the way that environmental, social and corporate governance issues are managed is part of companies’ overall management quality needed to compete successfully.  Companies that perform better with regard to these issues can increase shareholder value by, for example, properly managing risks, anticipating regulatory action or accessing new markets while at the same time contributing to the sustainable development of the societies in which they operate. Moreover these issues can have a strong impact on reputation and brands, an increasingly important part of company value.[3]

      If this statement is true, the primary push for corporate governance standards will come from individual firms, responding to market requirements and consumer perceptions of their reputation and brands, as opposed to formal rulemaking by the state.

      Setting the strategy for the corporation obviously requires consensus on the goals and objectives of the corporation’s activities and the parties who are to be the primary beneficiaries of the performance of the corporation.  Traditionally, directors were seen as the agents of the persons and parties that provided the capital necessary for the corporation to operate—the shareholders—and corporate governance was depicted as the framework for allocating power between the directors and the shareholders and holding the directors accountable for the stewardship of the capital provided by investors.  While economists and corporate governance scholars from other disciplines recognized that the governance framework involved a variety of tools and mechanisms such as contracts, organizational designs and legislation, the primary question was how to use these tools and mechanisms in the best way to motivate and guarantee that the managers of the corporation would deliver a competitive rate of return.[4]  All of this is consistent with what has been described as the narrow view of corporate governance, one that conceptualizes corporate governance as an enforced system of laws and of financial accounting, where socio/environmental considerations are accorded a low priority.[5]

      While it has long been accepted that the principal participants in the corporate governance framework were the shareholders, management and board of directors, the scope of corporate governance began to change during the 1990s as new and different goals for corporate activities were suggested.  Sir Adrian Cadbury, Chair of the UK Commission on Corporate Governance, famously offered the following description of corporate governance and the governance framework in the Commission’s 1992 Report on the Financial Aspects of Corporate Governance:

      Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. 

      Cadbury’s formulation of corporate governance brought an array of other participants, referred to as stakeholders, into the conversation: employees, suppliers, partners, customers, creditors, auditors, government agencies, the press and the general community.  As described by Goergen and Renneboog: [a] corporate governance system is the combination of mechanisms which ensure that the management (the agent) runs the firm for the benefit of one or several stakeholders (principals). Such stakeholders may cover shareholders, creditors, suppliers, clients, employees and other parties with whom the firm conducts its business.[6]  The principles of corporate governance of the Organisation for Economic Cooperation and Development clearly state that the corporate governance framework should recognize the rights of stakeholders (i.e., employees, customers, partners and the local community) as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

      The focus on interested parties beyond shareholders is the hallmark of a broader view of corporate governance that emphasizes the responsibilities of business organizations to all of the different stakeholders that provide it with the necessary resources for its survival, competitiveness, and success.[7] In this conception, managers remain primarily accountable to the stockholders who have placed their wealth in the hands of those managers; however, managers, particularly the members of the board of directors, are also responsible to groups of stakeholders that have made equally significant contributions to the corporation and these stakeholder responsibilities impose additional constraints on managerial action and the primacy of shareholder rights.[8]  Rahim, noting that the roles and responsibilities of directors have been described as the board as manager, pointed out that the duties of board members have been vastly extended as CSR has moved from the margins to the center of corporate governance attention.[9]

      The stakeholder approach to corporate governance arose out of a growing sense that more consideration had to be given to the whole set of legal, cultural, and institutional arrangements that determine what public corporations can do, who controls them, how that control is exercised, and how the risks and return from the activities they undertake are allocated.[10]  The impact and importance of corporate governance was emphasized by Gourvevitch and Shinn in the following quotes from their book on the new global politics of corporate governance[11]:

      Corporate governance–the authority structure of a firm–lies at the heart of the most important issues of society... such as who has claim to the cash flow of the firm, who has a say in its strategy and its allocation of resources. The corporate governance framework shapes corporate efficiency, employment stability, retirement security, and the endowments of orphanages, hospitals, and universities. It creates the temptations for cheating and the rewards for honesty, inside the firm and more generally in the body politic. It influences social mobility, stability and fluidity... It is no wonder then, that corporate governance provokes conflict. Anything so important will be fought over... like other decisions about authority, corporate governance structures are fundamentally the result of political decisions.  Shareholder value is partly about efficiency. But there are serious issues of distribution at stake – job security, income inequality, social welfare.

      Governance Structure

      Corporate governance begins with the establishment of rules and procedures for allocation of authority among groups and persons at various levels within the organizational hierarchy of the company.  A person or group vested with authority has the legitimate power to hold the people reporting to him/her or them accountable for their actions and performance and the ability to directly influence, or control, the scope of the duties and responsibilities of such persons and the manner in which they discharge those duties and responsibilities.  Authority within a company is typically described through a chain of command, which is the system of hierarchical reporting relationships within the company’s organizational structure that also identifies where people (and groups of similarly-situated people, such as shareholders) rank in relation to one another and their formal scope of authority within the company.  For example, a large US corporation with multiple business units may have five levels in the organizational hierarchy ranging vertically from top to bottom as follows:

      The shareholders, who are the owners of the corporation;

      The board of directors and the various committees thereof, all of which serve as trustees of the interests of the shareholders in overseeing the activities of the managers of the corporation;

      The senior, or executive, management of the corporation including the chief executive officer (CEO), the president or chief operating officer (COO), and the various executive and senior vice presidents responsible for oversight of major functional and business units;

      The divisional managers, who perform the day-to-day management functions within each of the business units (i.e., units focusing on products or markets); and

      The functional managers, who perform the day-to-day management functions within each of the functional units (i.e., units focusing on functional activities such as research and development, manufacturing, sales and marketing or finance). 

      The multi-level hierarchy described above is certainly correct from an ideal perspective as well as a matter of US corporate law; however, it does not represent the typical system of reporting relationships for an operations viewpoint.  For example, while the shareholders are at the top of the pyramid they are not directly involved in issuing orders to, and exercising control and authority over the day-to-day activities of, the employees of the company.  Instead, the key reporting decisions that must be made relate to the senior executives and the divisional and functional managers.  Similarly, the members of the board of directors do not expect to be able to walk into the company’s facilities and give instructions to the employees.  The directors look out for the interests of the shareholders and carry out their duties and responsibilities by selecting the CEO and the other members of the executive team and evaluating their performance.  The relevance of this model is limited in the case of large public corporations given the large number of shareholders and the practical limitations that exist on their ability to quickly and directly influence the composition of the board of directors in spite of recent shareholder activism.  However, in the case of small, but rapidly growing, emerging companies the outside shareholders—generally venture capitalists and other professional investors—are very involved in the designation of directors and in the selection and evaluation of each of the members of the executive team.

      Board of Directors

      Regardless of the size of the company and any other rules to which the company may be subject due to its status as a public company, the board of directors is the focal point for corporate governance activities and responsibilities.  Each jurisdiction has its own set of statutory rules regarding the composition of the board and the method for selecting directors and these rules apply to all companies regardless of their size.  However, with regard to public companies, as well as larger privately held businesses that either have a large number of outside shareholders or may be looking to become a public company in the future, notice must be taken of development such as those that have been occurring in the US, which has seen a substantially increased role and authority for independent directors; expanded responsibilities of various committees of the board of directors, notably the audit committee; and imposition of requirements relating to the financial expertise of board members, particularly those serving on the audit committee, and education and training of directors.

      Audit committees of the boards of directors of public companies have become the foundation of many aspects of the emerging corporate governance scheme for public companies in the US.  Specific rules have been promulgated regarding the structure and composition of audit committees, and such committees have been given broad responsibilities with respect to oversight of various activities and procedures include engagement of outside auditing firms, establishment and monitoring of internal controls and creation of procedures for receipt and investigation of complaints regarding questionable accounting or auditing matters.  The audit committee is also a key participant in the company’s efforts to assess risks and develop and implement risk management strategies.  Minimum qualifications for service on an audit committee have been promulgated by the Securities and Exchange Commission and the major exchanges and place a premium on education and experience in the accounting and finance areas and the ability to critically evaluate the recommendations and decisions of senior management and the outside auditors with respect to financial reporting issues.

      CEO and Executive Team Members

      While there are examples of organizations that are led by a single individual exercising what appears to be dictatorial control over day-to-day activities and long-term strategy the realities of an increasingly complex business environment, even for smaller companies, generally dictate the creation of teams of top managers to coordinate the activities of the business units that are part of the organizational structure of the company.  These teams are commonly referred to as executive teams since they are composed of the CEO of the entire company and the CEOs of key functional departments—research and development, manufacturing, sales and marketing, finance and human resources—and any major business units with a non-functional focus such as divisions formed to concentration on specific products or markets. 

      While the formal role of the members of the executive team, as officers of the company, is to act as agents for the directors and shareholders of the company, as a practical matter the executive team exerts substantial authority over the acquisition and use of the company’s resources and the decisions made by the members of the executive team are the determining factors in the success or failure of the strategies pursued to increase shareholder value. The size and composition of the executive team evolves with the growth of the company, changes in its key operational activities and decisions about which products and markets should be pursued using the company’s scarce resources.  In most cases executive team members wear multiple hats—they are responsible for overseeing the activities of various key business units (i.e., departments or divisions) and looking out for their interests while simultaneously working to create and execute integrating mechanisms and lateral processes to ensure that all of the groups, including their own, collaborate effectively to achieve the overall goals for the entire company.  Members of the executive team must have the deep experience and knowledge necessary to lead the company toward development of a core competency in their area of specialization as well as the personal skills to positively interact with other team members and the ability to think strategically on behalf of the company and all of its stakeholders.[12]

      In most instances, the person with the most responsibility for, and control over, the organizational design of the company—the recognized leader of the executive team—is the CEO.  While the CEO reports to the board of directors and the board of directors is vested with more legal authority than any officer of the company, including the CEO, it is the CEO to whom the directors turn for leadership in setting strategy and putting the assets and other resources of the company to work in order to achieve the stated goals and objectives of the company.  The CEO is almost always a member of the board of directors and, until recently, the common practice among public companies in the US was for the CEO to also serve as the chairperson of the board of directors.  While it is now the general rule that US public companies, as well as many larger privately-held companies, will fill a majority of the seats on the board of directors with outsiders (i.e., non-employees and persons who do not represent a large shareholder block) it is nonetheless still true that the CEO exerts significant influence over the board of directors even in those circumstances.

      Every CEO has a broad, if not overwhelming, set of duties and responsibilities.  Some of these duties are formal and prescribed by law and the governing documents of the company; however, most of the expectations imposed on the CEO are often vague and are left to the CEO to define and execute.  A CEO is confronted with challenges in a number of different areas and from various stakeholders and he or she must be able to balance and prioritize the demands on his or her time and intellectual resources.  For example, at any point in time the CEO may be focusing on the timetable for launching a new product or service and establishing and testing specifications for the product or service; evaluating and responding to unforeseen actions by competitors; responding to the concerns of key customers; reviewing the suggestions of the marketing team regarding shifts in brand strategy and image of the company; and preparing for the next board meeting and a presentation to prospective new investors.

      Many of the basic duties and responsibilities of the CEO remain the same regardless of the size of the company and its stage of development; however, successfully steering an emerging company into the marketplace does not necessarily mean that the CEO will thrive as the leader of a public company nor is it always the case that a CEO of a large multi-national firm can seamlessly take over the reins of a new business.  As the company grows the CEO must be able to appreciate the need for more formal planning and creation of internal controls and must be prepared to delegate authority in many areas to the members of the executive team that the CEO is responsible for recruiting and managing.  In addition, the CEO of an emerging company, often a member of the founding group, must be willing to change his or her style of leadership to facilitate greater participation by other executive team members and key managers at lower levels of an increasingly taller organizational hierarchy.  Finally, as the company expands the CEO will need to invest more time in building and maintaining relationships with new stakeholders including vendors, customers, investors and journalists and will need to focus on new issues such as financial reporting and accounting practices, risk management and globalization.

      Empirical studies, as well as anecdotal information, confirm that the skills, energy and judgment of the members of the executive team are important factors in determining the success or failure of any business venture.  Some well-known venture capitalists, notably Arthur Rock, one of the initial backers of Apple Computers, have a decided preference for investing in strong management teams even if the associated business model is less than fully developed.  On the other hand, many investors will not blindly follow executives that have been successful in the past if the proposed business model does not make sense and will insist upon a showing the company will be able to forge and maintain a competitive advantage and develop the right products for the right markets.  Even in that case, however, the ultimate viability of the business model will depend on the decisions that the CEO, working with the other executives of the company, make with regard to each of the key elements of organizational design—strategy, including vision, governance and comparative advantage; organizational structure, including power and authority, information flow and organizational roles; organizational culture and values; business processes and lateral linkages, including information technology; compensation and reward systems; and human resource management, including organizational learning.[13]

      Leadership

      Governance is the means by which companies can be effectively led and the key players in the governance structure—the directors and executive officers—must accept and embrace their leadership responsibilities.  Leadership is a universal phenomenon that has preoccupied scholars, politicians and others for centuries.[14] Zagoršek observed: . . . the simultaneous appearance of social institutions such as government, organized religion, and a significant role for individual leaders argues that there may well be something about people in complex organizations that provides a social value in having ‘leaders’—they arise to fulfill a basic social function.[15]  In the management context leadership has been consistently identified as playing a critical role in the success or failure of organizations and some surveys have pegged up to 45% of an organization’s performance on the quality and effectiveness of its leadership team.[16] Apart from organizational performance, researchers have consistently found a strong correlation between leadership styles and behaviors and the job satisfaction and performance of subordinates.[17]

      During the early years of serious research in the leadership area the focus was primarily on Western leadership styles and practices.  This occurred for various reasons including the location of the critical mass of researchers in the US and the fact that most companies operated primarily in the US with some cautious expansion into foreign markets with similar linguistic and cultural traditions.  However, several factors—globalization of the workforce, expansion of operations into numerous around the world and exposure to increase global competition—has forced leadership scholars to incorporate culture into their research and theories since leaders of businesses of all sizes in all countries must be prepared to interact with customers and other business partners from different cultures and leaders of larger companies have the additional challenge of managing multinational organizations and aligning a global corporate culture with multiple and diverging national cultures.[18]  Another driving force in the push for more work on the relationship between culture and leadership has been the emergence of an international research community that includes scholars living, working and observing in all parts of the world and this has led to expansion of the scope of inquiry to include such diverse topics as leadership styles of managers and entrepreneurs in Russia and other countries that were formerly part of the Soviet Union.[19]

      Definitions of Leadership

      The effective study and understanding of leadership begins with constructing a workable definition of the term leadership. Interestingly, while leadership has been rigorously studied and discussed for centuries, a consensus regarding how the term leadership can and should be defined has been elusive.  In this regard, Stogdill observed that there are almost as many definitions of leadership as there are persons who have attempted to define the concept and Fiedler wrote that [t]here are almost as many definitions of leadership as there are leadership theories—and there are almost as many theories of leadership as there are psychologists working in the field.[20]  Dickson et al. succinctly described leadership as involving disproportionate influence and noted that leadership roles around the world are universally associated with power and status and that it is therefore important to understand how power and status are distributed in a society in order to obtain a clear picture of leadership roles in that society.[21]  The researchers involved in the Global Leadership and Organizational Effectiveness (GLOBE) project defined leadership as . . . the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizations of which they are members.[22]  The potential influence of leaders is substantial as the following observation of the GLOBE researchers illustrates: When individuals think about effective leader behaviors, they are more influenced by the value they place on the desired future than their perception of current realities.  Our results, therefore, suggest that leaders are seen as the society’s instruments for change.  They are seen as the embodiment of the ideal state of affairs."[23]

      Eckmann offered a short and not inclusive list of leadership definitions from a variety of sources and activities that included the following[24]:

      The creative and directive force of morale

      A process of mutual stimulation which, by the successful interplay of relevant individual differences, controls human energy in the pursuit of a common cause

      The process by which an agent induces a subordinate to behave in a desired manner

      Directing and coordinating the work of group member, a definition that is more appropriate for management activities

      An interpersonal relation in which others comply between they want to, not because they have to, a formulation similar to the concept of transformational leadership discussed elsewhere in this Guide.

      The process of influencing an organized group toward accomplishing its goals and the creation of conditions for the team to be effective, both closely linked to the study and practice of team leadership

      The thing that wins battles, a contribution by General Patton

      Muczyk and Holt defined leadership, in a general sense, as: . . . the process whereby one individual influences other group members toward the attainment of defined group or organizational goals. In other words, the leadership role describes the relationship between the manager and his or her subordinates that results in the satisfactory execution of subordinates’ assignments and, thereby, the attainment of the important goals for which the leader is responsible and is instrumental in setting. At the very minimum, leadership requires providing direction and impetus for subordinates to act in the desired direction.[25]  They believed that it was important to distinguish leadership per se from actions or behaviors of leaders that are actually enablers or facilitators of effective leadership, such as the traits, tendencies and practices of leaders with respect to such things as planning, communicating, motivating and decision making. 

      Leadership Roles and Activities

      While leaders can be distinguished from managers, leaders nonetheless are responsible for a number of the same functions typically categorized as managerial such as setting goals and designing strategic plans to achieve those goals, communicating directives to other members of the organization, overseeing execution of the organizational strategy and setting guidelines for motivating organizational members and assessing their performance.  All leaders, regardless of their position, are engaged in the following core roles and activities provided by the four-factor theory of leadership proposed by Bowers and Seashore: support, in the form of leader behaviors that enhance a subordinate’s feelings of personal worth and importance; interaction facilitation, in the form of leader behaviors that encourage organizational members to develop close and mutually satisfying relationships; goal emphasis, in the form of leader behaviors that motivate organizational members to achieve excellent performance and fulfill the goals set for the organization; and work facilitation, in the leader behaviors that support achievement of the organizational performance goals, including activities such as coordinating, planning and scheduling and providing subordinates with the requisite tools, materials and technical knowledge necessary for them to do their jobs.[26]  In addition, leadership roles and the focus of leader activities vary depending on where he or she is located within the organizational hierarchy.  Finally, other factors such as the type of business engaged in by the organization, the environmental conditions that the organization is facing, the stage of the organization’s development, the leader’s role in the launch of the organization (e.g., a founder) and the scope of the organization’s global business activities will have an influence on the leader’s role and the behaviors needed in order for the leader to be effective.[27]  The list below lays out various core leadership roles and activities derived from the research and observations on the subject.[28]

      _______________

      Core Leadership Roles and Activities

      Selecting and defining goals and objectives for the organization; designing strategic plans to achieve those goals and objectives; and identifying, promoting and managing changes required to achieve future goals and objectives

      Communicating ideas about their vision for the organization and providing directions to other members of the organization regarding actions to be taken to realize the vision

      Designing and implementing an organizational structure that promotes efficient flow of information and collaboration among members of the organization to develop new products and services and solutions for problems and issues raised by customers

      Overseeing execution of the organizational strategy and establishing procedures for assessing the performance of organizational members

      Implementing human resources management practices that support their vision and provide members of the organization with access to training necessary to maintain and improve the skills required for them to positively participate in the execution of the vision

      Engaging in proactive pursuit and collection of information from internal and external sources and implementation of procedures for efficient analysis and dissemination of relevant information among members of the organization

      Engaging in behaviors that support organizational members and enhance their feelings of personal worth and importance

      Engaging in behaviors that facilitate interaction among organizational members; encourage members to develop close and mutually satisfying relationships; create high quality teams; and train members of the organization on team building techniques

      Engage in behaviors that motivate organizational members to achieve excellent performance and fulfill the goals set for the organization using a range of techniques such as formal authority, role modeling, delegation of authority, setting specific and challenging goals, and adroit and intelligent use of rewards and punishments

      Engage in behaviors that support achievement of the organizational performance goals, including activities such as coordinating, planning and scheduling and providing organizational members with the requisite tools, materials and technical knowledge necessary for them to do their jobs

      Engage in behaviors consistent with service as a steward of the assets, resources, mission, reputation and legacy of the organization including selection and development of potential future leaders and representing the organization with integrity in the communities in which it operates

      _______________

      Leadership Styles

      One of the most interesting, and voluminously researched, topics in leadership studies is leadership style.  In general, leadership style focuses on how leaders interact with their followers and has been more specifically defined as the manner and approach of providing direction, motivating people and achieving objectives.[29]  While there a number of different models of leadership style, several of which are discussed in the following sections, three fundamental dimensions are often represented: the leader’s approach to influencing the behavior of his or her followers; the manner in which decisions regarding the direction of the group are made, with a specific emphasis on the level of participation offered to followers; and the balance struck between goal attainment and maintaining harmony within the group (sometimes referred to as group maintenance).[30]  For example, two alternative approaches to influencing the behavior of follows are the transactional leadership, which views the leader-follower relationship as a process of exchange, and transformational leadership, which relies on the leader’s ability to communicate a clear and acceptable vision and related goals that engender intense emotion among followers that motivates them to buy into and pursue the leader’s vision. Contrasting styles for decision-making are found when distinguishing authoritarian (autocratic) and participative (democratic) leaders.  Finally, the balance between goals and maintenance is emphasized in those models, such as Blake and Mouton’s Grid Theory, that analyze the degree to which leaders exhibit task and/or relationship orientation in their interactions with followers.

      Many commentators, notably Kotter, have observed that coping with change is one of the most important challenges confronting leaders of organizations, particularly given the unending pressures caused by globalization, innovations in technology and communications and turbulent economic times.[31]  Reardon et al. suggested that five phases of change could be identified—planning, enabling, launching, catalyzing and maintaining—and that each required a leader to use one of four different types of leadership styles—commanding, logical, inspirational or supportive—that was most appropriate for that phase.[32]  Muczyk and Adler have questioned the feasibility of this model given that it calls for an uncommonly versatile and flexible leader.[33]  However, other researchers who have studied the evolution of organizations have also concluded that appropriate leadership styles do tend to change as time goes by and that while it may not be feasible for a single leader to attempt to change his or her style, changes at the top of the organizational hierarchy may be needed from time-to-time in order to bring in the right person for the particular situation.[34]

      _______________

      Leadership Styles

      Definitions and descriptions of leadership styles typically are based on three fundamental dimensions:

      •  The leader’s approach to influencing the behavior of his or her followers

      •  The manner in which decisions regarding the direction of the group are made, with a specific emphasis on the level of participation offered to followers

      •  The balance struck between attaining goals and maintaining harmony within the group (sometimes referred to as group maintenance)

      Among the styles included in representative models of leadership styles are the following: 

      •  Authoritarian or autocratic; participative or democratic; and delegative or free reign (sometimes referred to as laissez faire)

      •  Exploitive authoritative, benevolent authoritative, consultative system, and participative

      •  Country Club Leadership (High Concern for People/Low Concern for Production), Produce or Perish Leadership (Low Concern for People/High Concern for Production), Impoverished Leadership (Low Concern for People/Low Concern for Production), Middle-of-the-Road Leadership (Medium Concern for People/Medium Concern for Production), and Team Leadership (High Concern for People/High Concern for Production)

      •  Directive autocrat, permissive autocrat, directive democrat, and permissive democrat

      •  Coercive, authoritative, affiliative, democratic, pacesetting, and coaching

      •  Leadership approaches: strategy, human-assets, expertise, box, and change

      •  Servant

      _______________

      One highly discussed concept of leadership style that is particularly relevant to sustainability is transformational leadership, a term first used along with transactional leadership by James MacGregor Burns in 1978.[35]  Burns began by defining leadership as leaders inducing followers to act for certain goals that represent the values and the motivations—the wants and needs, the aspirations and expectations—of both leaders and followers.  For Burns, leaders had the greatest impact on their followers when they were able to motivate followers to action by appealing to shared values and by satisfying the higher order needs of the led, such as their aspirations and expectations.   He went on to say that . . . transforming leadership ultimately becomes moral in that it raises the level of human conduct and ethical aspiration of both leader and the led, and thus it has a transforming effect on both.  While Burns clearly had feelings about the value of transformational leadership he also recognized that leaders often needed to engage in another form of leadership, which he referred to as transactional, and which was based on transactional exchanges of value between leaders and followers; in other words, leaders offered and awarded items of value under his or her control in exchange for followers providing needed inputs such as services.[36]

      Management

      Given that management has been so widely studied and practiced for literally thousands of years, it is not surprising to find a wide array of possible definitions of the term.  At the most basic level, the verb manage derives from the Italian word maneggiare, which is means to handle.  A number of definitions of management have focused on the specific tasks and activities that all managers, regardless of whether they are overseeing a business, a family or a social group, engage in, such as planning, organizing, directing, coordinating and controlling.  One of the simplest, and often quoted, definitions of management was offered by Mary Parker Follett, who described it as the art of getting things done through people.[37]  The notion of management through people can also be found in the work of Weihrich and Koontz, who began with a basic definition of management as the process of designing and maintaining an environment in which individuals, working together in groups, accomplish efficiently selected aims.[38]  They then went on to expand this basic definition with the following observations:

      Managers carry out certain universally recognized basic managerial functions, including planning, organizing, staffing, leading and controlling

      Management applies to any kind of organization.

      Management principles apply to managers at all levels of the organization, not just executives and senior managers positioned at the top of the organizational hierarchy.

      The goal of all managers is the same: to create a surplus.

      Managers are concerned with improving productivity, which implies both effectiveness and efficiency.[39]

      Elements mentioned by Weihrich and Koontz in the explanations and observations above have figured prominently in other definitions of management.  For example, Jones et al. referred to management as the process of using an organization’s resources to achieve specific goals through the functions of planning, organizing, leading and controlling.[40]  The importance of the managerial functions was also emphasized by Weihrich in his explanation of the systems approach to organizational management based on an input-output model in which inputs from an organization’s external environment (i.e., people, capital and technology) were transformed into outputs demanded by various organizational stakeholders in a transformation process based on and guided by managerial functions such as planning, organizing, staffing, leading and controlling.[41]

      Weihrich has discussed the interesting question of whether management is best seen as a science or as art and has suggested that [m]anaging, like so many other disciplines—medicine, music composition, engineering, accountancy, or even baseball—is in large measure an art but founded on a wealth of science.[42]  He went on to caution that [e]xecutives who attempt to manage without . . . management science must trust to luck, intuition, or to past experience and that managers seeking to avoid the tedious and dangerous path of learning through trial and error must be able to access the knowledge that has been accumulated regarding the practice of management.[43]  Weihrich wrote that application of scientific methods to management, including determination of facts through observation followed by identification of causal relationships that can have value in predicting what might happen in similar circumstances, allows us to classify significant and pertinent management knowledge and derive certain principles that can be used as guidelines for managerial decisions and instructions.  For example, a manager in a growing organization will eventually be confronted with the need to begin delegating authority and Weihrich suggests that the manager can turn to various principles of management that are relevant such as the principle of delegating by results expected, the principle of equality of authority and responsibility, and the principle of unity of command.  Principles are merely predictive; they do not guarantee a particular result.  However, they do provide a tested starting point for the manager.  Also important in the management field are techniques, which Weihrich defined as ways of doing things, methods for accomplishing a given result.[44]  Like principles, techniques are originally based in theory and are tested to validate their effectiveness.  Examples of management techniques listed by Weihrich include budgeting, cost accounting, networking planning and control techniques, managing-by-objectives and total quality management.

      As time has passed, management has come to be recognized as one of the core factors of production along with machines, materials, money, technology and people.  It is well-known that productivity has become a leading indicator of organizational performance and Drucker has argued that [t]he greatest opportunity for increasing productivity is surely to be found in knowledge, work itself, and especially in management.[45]  Bloom et al. coordinated a survey and analysis of more than 4,000 medium-sized manufacturing operations in Europe, the US and Asia and their findings released in 2007 confirmed that firms across the globe that apply accepted management practices well perform significantly better than those that do not.[46]  Surveyed management practices included activities relating to shop floor operations, performance management and talent management, and performance metrics included labor productivity, sales growth and return on capital employed. The US led the way with respect to the quality of management among firms included in the survey; however, companies from other countries were gaining ground quickly and, in fact, at that time over 15% of the Indian and Chinese firms included in the survey were characterized as better managed than the average US firm. 

      Management and Leadership

      One threshold question that should be addressed when studying management systems and practices is the differences between management and leadership and, correspondingly, the distinctions between managers and leaders in the context of operating an organization.[47]  One way to approach this topic is to review some of the opinions of various researchers and commentators who have devoted a substantial amount of time to the topic of leadership and understanding just what makes an effective leader.  For example, Bennis has said: There is a profound difference between management and leadership, and both are important. To manage means to bring about, to accomplish, to have charge of or responsibility for, to conduct. Leading is influencing, guiding in a direction, course, action, opinion. The distinction is crucial.  Bennis has also compiled the following list of differences between managers and leaders[48]:

      The manager administers; the leader innovates.

      The manager is a copy; the leader is an original.

      The manager maintains; the leader develops.

      The manager focuses on systems and structure; the leader focuses on people.

      The manager relies on control; the leader inspires trust.

      The manager accepts reality; the leader investigates it.

      The manager has a short-range view; the leader has a long-range perspective.

      The manager asks how and when; the leader asks what and why.

      The manager has his or her eye always on the bottom line; the leader has his or her eye on the horizon.

      The manager imitates; the leader originates.

      The manager accepts the status quo; the leader challenges it.

      The manager is the classic good soldier; the leader is his or her own person.

      The manager does things right; the leader does the right thing.

      Kotter has also addressed the distinction between management and leadership.  After joining Bennis in noting the importance of both activities—Leadership and management are two distinctive and complementary systems of action . . . Both are necessary for success in an increasingly complex and volatile business environment—Kotter elaborates on some of the differences: Management is about coping with complexity . . . Without good management, complex enterprises tend to become chaotic . . . Good management brings a degree of order and consistency . . . Leadership, by contrast, is about coping with change . . . More change always demands more leadership.[49]  Kotter also provided a short list of some of the principal activities associated with management and leadership, noting the manager, who is concerned with managing complexity, is expected to focus on planning and budgeting, organizing and staffing and controlling and problem solving while the leader, who should be guiding his or her organization through constructive change, must be adept at setting the direction for the organization (i.e., a vision of the future and strategies that should be followed to achieve that vision) and aligning the human resources of the organization and motivating and inspiring them to move in the direction established by the leader.[50]

      Management Roles and Activities

      In order to understand whether someone is being an effective manager it is necessary to have some idea of the expectations regarding the person’s roles and activities within the organization.  A number of different approaches have been taken in creating models of managerial functions or activities.  Fayol famously argued that there were five principle managerial functions—planning, organizing, commanding, coordinating and controlling—and others have accepted these categories and added a handful of others such as staffing and rewarding.  Mintzberg criticized Fayol’s five functions as being an inaccurate reflection of the complex and chaotic nature of the manager’s tasks and suggested an alternative model of the ten core roles, or organized sets of behaviors, identified with a managerial position, which he divided up into three groups: interpersonal roles, informational roles and decisional roles.  Others have pointed out that it is useful to distinguish between functional and general managers, each of whom have their own unique duties, responsibilities and skill requirements.  Finally, the position or level of the manager in the organizational hierarchy is likely to be relevant to his or her roles and activities: first-line managers focus primarily on supervision of operational employees, middle managers focus primarily on supervising the first-line managers and/or staff departments, and top-level or senior managers focus on setting the strategic direction for the entire organization.[51]

      Management Skills

      Researchers and commentators have attempted to identify the skills, motivations and behaviors that managers and administrators must have in order to effectively carry out their duties and responsibilities.  The search has led to a plethora of suggestions and the challenge is to devise methods for assisting both new and experienced managers in identifying, acquiring and practicing the tools they need in order to be successful in their managerial roles.  There is no single answer since the particular skills that a specific manager may need will vary depending on whether he or she is engaged in general or functional management and where the manager fits into the overall organizational hierarchy, and other situational factors certainly play an important part in determining what might be effective management in a specific context.  Moreover, success in formal management education does not guarantee that someone will be a strong manager and learning from experience, including mistakes, is necessary to improve existing skills and acquire new skills.

      Researchers such as Fayol and Mintzberg focused their attention on the functions and roles of managers and the implicit message was that managerial skill development should concentrate on building the capacity to be effective in performing these functions and roles.[52]  Mintzberg’s efforts to identify some of the distinguishing characteristics of managerial work, which ultimately led to the creation of his model of managerial roles, were accompanied by his assessment that effective managers must recognize and master a number of important managerial skills, including development and nurturing of peer relationships (i.e., liaison contacts), negotiation and conflict resolution skills, the ability to motivate and inspire subordinates, establishment and maintenance of information networks, the ability to communication effectively when disseminating information, and the ability to make decisions in conditions of extreme ambiguity and allocate resources, and he argued that the entire process of identifying the various managerial roles and related skills, while not guaranteeing that a manager will be effectiveness and successful, provided a framework for setting priorities and establishing a managerial training regimen.  Mintzberg’s work provided support for managerial skills posited by others: the need to deal with an unrelenting pace of activities and decisions, the need to cope with complexity; the need to manage the scarce resources of time and attention; preferences for verbal media; and the need to create and nurture communication relationships with superiors, outsiders and subordinates.  A general review of the literature expands the list of desired managerial attributes, activities and skills to include an even wider range of things such as leadership, people focus, human resource management, communications and interpersonal skills, conflict resolution, information processing, the ability to make decisions under ambiguous conditions, resource allocation, entrepreneurship and introspection.

      _______________

      Skills of Effective Managers

      Cameron and Whetten went on propose a list of the skills that are performed by effective managers, a process that began with their own study of managers at various levels of a number of public and private organizations and then was supplemented with a comparison of their results with the findings of other scholars who had proposed their own collection of characteristics of effective managers.[53]  The result was the following list of both personal and interpersonal skills that was limited to characteristics that had trainable behavioral components[54]:

      Self-awareness (personality, values, needs and cognitive style)

      Managing personal stress (time management, personal goals and activity balance)

      Creative problem solving (divergent thinking, conceptual blocks and redefining problems)

      Establishing supportive communication (listening, empathy and counseling)

      Improving employee performance and motivating others (needs/expectations, rewards and timing)

      Effective delegation and joint decision making (assigning tasks, evaluating performance autonomous versus joint decision making)

      Gaining power and influence (sources of power, converting power to influence and beneficial use (not abuse) of power)

      Managing conflict (sources of conflict assertiveness and sensitivity and handling criticism)

      Improving group decision making (chairing meetings, avoiding pitfalls of bad meetings and making effective presentations)

      _______________

      Management Styles

      As with other topics that have been intensely reviewed in the management literature, there is a wide array of definitions of the term management style.  A fairly simple approach is to view management style simply as the way that an organization is managed.[55]  Schleh referred to management style as . . . [t]he adhesive that binds diverse operations and functions together. It is the philosophy or set of principles by which you capitalise on the abilities of your people. It is not a procedure on ‘how to do,’ but is the management framework for doing. A management style is a way of life operating throughout the enterprise. It permits an executive to rely on the initiative of his people.[56]  Yu and Yeh defined management style as a preferred way of managing people in order to bind diverse operations and functions together, as well as to exercise control over employees, and is considered as a set of practices that has been adopted either by an individual, a department, or whole organization.[57]  Others have approached descriptions of management style by attempting to identify various functions of the manager.  For example, Quang and Vuong noted that Khandwalla defined management style as the distinctive way in which an organisation makes decisions and discharges various functions, including goal setting, formulation and implementation of strategy, all basic management activities, corporate image building and dealing with key stakeholders.[58]

      Quang and Vuong pointed out that there is no single management style that applies in all instances and that an organization’s operating conditions will influence the style that is selected.[59]  This assertion is consistent with other indications that management styles are influenced and determined by a number of different factors.  Some believe that societal culture has the biggest impact on the management styles selected and used by organizations operating within a society and there is ample evidence for the proposition that one can find distinctive management styles in different countries such as France, India, Japan, the US, and Vietnam.[60]  This has led to the argument that each societal culture has its own core style of management based on the values and norms that predominate in that culture, with some allowances for local variations.[61]  However, other researchers have conducted exhaustive studies of large number of organizations in the same country and found evidence of a wide range of management styles within the same societal culture. For example, Burns and Stalker identified two very different management styles in the United Kingdom—organic and mechanistic[62]—and Khandwalla was able to come up with seven categories of management style in Canada[63] and found variations in management styles between firms in different industries in India as well as differences among Indian firms operating in the same industry.[64]

      While not making it any easier to create prescriptions for effective management styles, the reality seems to be that there are a number of factors that likely have an impact on the selection and effectiveness of management styles, including the type of organization, business purpose and activities of the organization, size of the organization, operating environment, corporate culture, societal culture, information technology and communication and, finally, the personal style and behavior of the owner or chief executive.  Quang and Vuong noted that the authoritarian management styles often used in state-owned enterprises in many developing countries reflected the governing styles of their political leaders.[65]  They also suggested that in small and mid-sized firms it could be expected that the size of the organization would lead to the personal style of the owner or chief executive having a significant impact on how the firm operated and subordinates behaved.[66]  Lewis argued that advances in communications and information processing technology could change the way that managers work and interact with their subordinates.[67]  Reddin’s model of management styles emphasized the importance of situational factors and was based on the fundamental principle that managerial behaviors and styles will and must vary depending on the where the manager is in the organizational hierarchy and the type of activities that he or she is overseeing.[68]  Finally, management styles will change as firms transition to new business models based on changing trends in the marketplace, such as greater emphasis on quality and customer service and satisfaction.[69]

      Management Systems

      A management system refers to what an organization does to manage its structures, processes, activities and resources in order that its products or services meet the organization’s objectives, such as satisfying the customer’s quality requirements, complying with regulations and/or meeting environmental objectives.  Elements of a management system include policy, planning, implementation and operations, performance assessment, improvement and management review.  By systemizing the way it does things, an organization can increase efficiency and effectiveness, make sure that nothing important is left out of the process and ensure that everyone is clear about who is responsible for doing what, when, how, why and where.  While all organizations should benefit from some form of management system, they are particularly important for larger organizations or ones with complicated processes.  Management systems have been used for a number of years in sectors such as aerospace, automobiles, defense and health care and guidance on content and implementation of such systems is now readily available through standards bodies such as the International Organization for Standardization (ISO) (www.iso.org).[70]

      2

      Corporate Governance and CSR

      Corporate governance  is the system and structures of rules, practices and processes by which a company is directed and controlled, the goals and objectives of the company are established and the performance of the company is tracked. [71]  Traditionally, corporate governance has focused on the owners of the corporation that have supplied the financial capital necessary for the business to operate (i.e., the shareholders), regulation of the duties and responsibilities of the persons that the owners have selected as their agent to deploy their financial capital and generate a reasonable return on their investment (i.e., the directors and the members of the executive team); the control environment, which includes accounting procedures, internal controls and external audits used to track the operational activities of the company selected by the directors as the best means for delivering the anticipated return on investment to the shareholders; and transparency

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