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Authentic Governance: Aligning Personal Governance with Corporate Governance PDF

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Management for Professionals Hubert Rampersad Saleh Hussain Authentic Governance Aligning Personal Governance with Corporate Governance Management for Professionals For further volumes: http://www.springer.com/series/10101 Hubert Rampersad (cid:129) Saleh Hussain Authentic Governance Aligning Personal Governance with Corporate Governance Hubert Rampersad, Ph.D. Saleh Hussain, MBA Business School of the Americas Saleh Hussain Consultancy and TPS International, Inc. Manama, Bahrain Miami Beach, Florida, USA ISSN 2192-8096 ISSN 2192-810X (electronic) ISBN 978-3-319-03112-5 ISBN 978-3-319-03113-2 (eBook) DOI 10.1007/978-3-319-03113-2 Springer Cham Heidelberg New York Dordrecht London Library of Congress Control Number: 2013956619 © Springer International Publishing Switzerland 2014 T his work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifi cally for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher’s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. T he use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. This Work is to be published in English by Sara Books Pvt. Ltd., New Delhi Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) Pref ace “Integrity is not a commodity. It’s the most rare and precious of personal attributes. It is the core of a person’s — and a company’s — reputation”. —John Stumpf, Chairman and CEO Wells Fargo Over the past years, we have heard and read plenty about how Boards of Directors should behave more responsibly in the light of corporate governance. Despite all these efforts, many implementations of corporate governance provide no protection from potentially catastrophic ethical failures. The situation at JPMorgan Chase, the world’s largest bank, early this year is an interesting case with regard to corporate governance. Government investigators have recently found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profi t centers” and that one of its most senior executives gave “false and misleading statements” under oath. JPMorgan executives also ignored a series of alarms that went off as the bank’s Chief Investment Offi ce breached one risk limit after another. Rather than ratchet back the risk, JPMorgan personnel reengineered the risk controls to silence the alarms. In a previously undisclosed case, prosecutors examined whether JPMorgan failed to fully alert authorities to suspicions about Bernard Madoff. And nearly a year after reporting a multibillion-dollar trading loss, JPMorgan did face a criminal inquiry over whether it lied to investors and regulators about the risky wagers. T his case pinpoints that JPMorgan’s corporate governance code and exhaustive regulations do not provide adequate protection. A recent study conducted by Labaton Sucharow, a New York City law fi rm, suggested that Wall Street still has a shaky grip on its ethical compass. Despite the fi nancial changes enacted after the 2008 fi nancial crisis, improper and even illegal activity is perceived as common among traders, brokers, portfolio managers, and bankers. Some other examples are the following: (a) US Treasury estimated that if Apple had more honestly assessed v vi Preface what percentage of its profi ts were generated by its US operations, it would have owed $2.4 billion more in federal taxes last year; (b) Wal-Mart’s often criticized treatment of employees as a commodity and its sometimes inhuman business ethics; and (c) Chevron has been accused of tax evasion as well a number of environmental infractions in several countries and hiring military force for use on native peoples. All above-mentioned organizations have comprehensive corporate governance codes in place, implemented by the left brain Big Four accountancy fi rms (PwC, KPMG, Ernst & Young, and Deloitte), which apparently are not working at all. Harvard Business School professor Bill George outlined in his article W hy Leaders Lose Their Way why powerful and talented leaders often misbehave and how they lose their moral bearings, such as Hewlett-Packard CEO Mark Hurd who resigned for submitting false expense reports concerning his relationship with a contractor; US Senator John Ensign (R-NV) who resigned after covering up an extramarital affair with monetary payoffs; and Lee B. Farkas, former Chairman of giant mortgage lender Taylor, Bean & Whitaker, who was found guilty for his role in one of the largest bank fraud schemes in American history. According to Bill George, they can avoid these pitfalls by devoting themselves to personal leadership development that cultivates their inner compass, based on self-refl ection. This pro- cess requires thought and introspection because many people get into leadership roles in response to their ego needs. Unethical behavior of top executives, poor ethical leadership, lack of integrity, mismanagement, fraud, corruption, and violating corporate governance codes are the main contributors towards the above-mentioned scandals. We urgently need a sustainable and innovative solution to this global epidemic. Most companies’ approaches to corporate governance are extremely formal, bureaucratic, cosmetic, not holistic, and not authentic and therefore fail to address above-mentioned shortcomings. It is time that we become aware that corporate gov- ernance cannot be controlled effectively with formal and exhaustive rules, regula- tions, guidelines, and procedures only. It is about decency and personal integrity, and this must be cultivated from within. As demonstrated by the examples given above, traditional corporate governance codes provide no protection from poten- tially catastrophic ethical failures. Company integrity must be a continuous infor- mal learning process, based on alignment with yourself and alignment with your company. This ethical process must be promoted and communicated within the whole company to all stakeholders consistently. In this way, ethical behavior will become a routine in the whole organization, and leaders and employees will gain more understanding about their responsibility with regard to ethical behavior. They will understand that it is their responsibility to act ethically, on duty as well as off duty. This is a more sustainable, comprehensive, and holistic approach to ethics and social responsibility. S ustainable corporate governance starts with personal leadership development, based on self-refl ection and introspection and embedding personal values in the mind of the Chairman, President, CEO, CFO, managers, and employees and coach- ing them to refl ect on these values honestly. In this way, good corporate Preface vii governance will be characterized by trust, credibility, transparency, personal and social responsibility, open communication, and a continuous learning process, embedded in an ethical culture. This cultural shift will also have a positive impact throughout society. Against this background, we propose an organic and holistic approach to corpo- rate governance, by integrating personal values and integrity into one overall authentic governance framework, in which formal corporate regulations and personal values mutually reinforce each other. This new theory h as been borne out of our leadership experiences in the corporate world. In this theory, we have defi ned gov- ernance in holistic and authentic terms, namely the systematic process of continu- ous, gradual, and routine improvement, steering, and learning that lead to sustainable high performance and ethical excellence. T his groundbreaking authentic governance method differs from traditional cor- porate governance concepts, which focus mainly on bureaucratic regulations, pro- cedures, and policies and which insuffi ciently consider the importance of authenticity, holistic approach, and alignment with human capital, needed to achieve ethical corporate excellence. Our innovative corporate governance approach is com- bined with powerful tools to deliver peak performance and to create a stable basis for trustworthiness, credibility, and personal and corporate responsibility. It places more emphasis on understanding yourself and the needs of others, meeting those needs while staying true to your personal and corporate values, improving your personal integrity continuously, making ethics a way of life, and aligning these with formal corporate regulations, procedures, and guidelines. This integrated gover- nance system, developed and globally trademarked by Dr. Hubert Rampersad, will create a paradigm shift in organizations and will work as a catalyst to accelerate the transformation of the personnel into committed and ethical executives and employees. Based on this new concept Dr. Rampersad has established the Authentic Governance Institute (AGI) in the United States (www.authenticgovernance.org), which is the global not-for-profi t membership association for the authentic gover- nance profession. AGI’s worldwide advocacy for authentic governance is reinforced by our globally recognized standards, certifi cation and licensee programs for consultants and organizations, extensive academic programs, eLearning programs, chapters of practice in 50 countries, and professional development opportunities. Become a member and see what AGI can offer you at every stage of your authentic governance career. Discover more about what our AGI membership is and what benefi ts it offers, and choose the type of membership that’s best for you. As an AGI member, you gain exclusive access to AGI publications and our global standards, networking options with our global chapters and online communities of practice, and career opportunities. AGI also offers a comprehensive authentic governance certifi cation program for accountants, fi nancial consultants, corporate governance practitioners and organizations globally. You will demonstrate your expertise and your commitment to the authentic governance profession with an AGI certifi cation. viii Preface This book is an essential reading for executives and managers in all industries, not only in the banking business. We therefore welcome the global publication of this book by Springer USA. Thanks are due to Abdullah Wallace for his editorial assistance. We also would like to express our thanks to our families, who have inspired and stimulated us to take this challenge to write this important book. We hope you will enjoy this new governance concept as much as we love bringing it to you. Your feedback is welcome via [email protected] and [email protected]. Miami Beach , Florida , USA Prof. Hubert Rampersad , Ph.D. Chairman, Authentic Governance Institute Manama , Bahrain Saleh Hussain , MBA Contents 1 Introduction ............................................................................................. 1 2 Authentic Governance Model ................................................................ 5 Part I Authentic Personal Governance 3 Personal Ambition................................................................................... 13 Personal Mission ....................................................................................... 24 Personal Vision ......................................................................................... 25 Personal Key Roles ................................................................................... 26 4 Personal Balanced Scorecard ................................................................. 29 Personal Critical Success Factors ............................................................. 31 Personal Objectives ................................................................................... 31 Personal Performance Measures ............................................................... 32 Personal Targets ........................................................................................ 32 Personal Improvement Actions ................................................................. 32 5 Personal Governance .............................................................................. 39 Plan ........................................................................................................... 39 Deploy ....................................................................................................... 40 Act ............................................................................................................. 41 Challenge .................................................................................................. 42 6 Alignment with Yourself ......................................................................... 47 Aligning Personal and Corporate Ambition with Ethics .......................... 51 ix

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