Does Your Portfolio Company Have A Governance Deficit?
Updated: May 31, 2022
Good Corporate Governance ensures that the interests of both shareholders and stakeholders are being recognised and upheld.
Following the aborted public debut of WeWork in 2019 and the subsequent implosion of the beleaguered company, the investor community is now sharply focused on the ‘old-school’ discipline of Good Corporate Governance. Increasingly it is being seen a critical element of the end-to-end investment process, both for early stage ventures and for more mature portfolio companies.
Our discussions with active investors and market commentators – both within Indonesia and throughout the SE Asian region – reinforce the importance of implementing sustainable governance principles and practices from the beginning of the investment cycle.
Mak Yuen Teen, Associate Professor at the National University of Singapore Business School contends that corporate governance cannot be an afterthought.
"Too many fall into the trap of thinking that corporate governance is only important after a company is listed and there are public shareholders. It is true that corporate governance priorities evolve over a company's life cycle but getting the right people in to constructively challenge ideas and provide advice, and putting in place basic policies and controls, should start from an early stage", he says.
At WCA, we believe that the drive for higher standards of governance, both inside and outside formal corporate structures, has a trickle-down impact that extends far beyond the bottom line.
It amplifies the importance of exhibiting integrity at all levels of the organisation and for promoting sound business conduct across the enterprise. Our experience with existing clients is that these values are then directly reflected in external performance metrics such as brand image, service experience quality and customer advocacy.
As such, the implementation of a toe-to-the-top ‘Good Corporate Governance’ culture means that the interests of both shareholders and stakeholders are being recognised and upheld throughout the investment cycle.
Moreover, the on-site operational management team has a pivotal role to play in executing good governance disciplines as a reinforcement of the executive oversight occurring at the BOC/BOD level.
To this end, WCA has developed an outsourced proposition called ‘Integrated Execution Service (IES)’.
Our IES offering reflects the ‘activist and interventionist’ approach that we adopt in managing enterprise investments. We deploy dedicated local resources in Indonesia to act as the on-the-ground representatives of both private equity firms and venture capital companies.
At the core of the IES eco-system is a high impact, low maintenance Project Management Office (PMO) function – in essence the ‘nerve centre’ of our entire service delivery platform.
We are committed to a charter of safeguarding the integrity of your investment thesis throughout the life of the enterprise. Our single-minded focus is to create extreme value for your investment portfolio and thereby optimising the outcome of your planned exit event.
With these objectives in mind, we embed governance-related performance indicators – technical, commercial, financial, legal and regulatory - into every component of the IES proposition hierarchy, namely:
The overarching company business plan (driven from the Investment Thesis)
The ‘Vital Few’ strategic initiatives (extracted from the company business plan)
The detailed work programs (aligned with the chosen strategic initiatives)
This discipline then enables the PMO team to monitor continually the performance of the enterprise and report back at all levels (to the on-site operational management team, the BOD/BOC members and - if appropriate – the investor HQ organisation).
Our experience indicates that multiple, enterprise-wide benefits flow from the implementation of a ‘Good Corporate Governance’ platform, as follows:
Now back to the question above - do you have a Governance Deficit?
An entity that has a ‘Governance Deficit’ lacks the security, knowledge and accountability to deal with the array of challenges that just keep coming. Technology disruption, cyber risk, regulatory change, workforce diversity, media scrutiny and global uncertainty are just a few of the major issues that management teams and their boards may have to confront.
The current COVID-19 pandemic presents the real prospect of entire sectors being required to transform their underlying business models as new operating norms emerge. Changes to industry structures, competitive dynamics, supply chain logistics, workforce distribution and consumer behaviour models are inevitable in the face of the massive disruption caused by the crisis.
As such every enterprise will be compelled to assess their current governance framework in the light of these changes and make the necessary adjustments to their policies and procedures. This is not a trivial undertaking but it is a challenge that the WCA team relishes.
So if your answer to the above question is ‘Yes’ or ‘Maybe’, please visit our website for more details.
You can also learn more about our customised IES offering here. Better yet, please feel free to contact our Indonesia office directly.
Don’t delay, our team of specialists in Jakarta are ready to discuss your requirements today!