Institutionalising Corporate
Governance in Government
Owned Enterprises
Utilising Systems, Socioecology and Cultural
Historical Activity Thinking to Grow a
Theory of Change
Prof J.C. Munene PILA Consultants / MUBS
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Why Systems Thinking / Lenses
Because of multiple formal and informal players
 Pivotal Players
 Important Players
Prof J.C. Munene PILA Consultants / MUBS
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A System of Pivotal Players
Agency
Contractor
Government Investment
Corporation (GIC)
State corporations
National and County Agencies
Oversight Office (NACAOO)
State agencies
County Corporations
County Agencies
President
GIC
President
Cabinet Secretaries
Governor
County Department Executives
Prof J.C. Munene PILA Consultants / MUBS
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From Ecology to Socioecology
 Ecology deals with living
Agencies
Contractors
Private
Sector &
Communiti
es
National Development Agenda
beings in their natural
environment
 Their key competence is coevolution
 Socioecology is about living
sociotechnical systems such as
corporations and institutions
 They need to co-evolve
Prof J.C. Munene PILA Consultants / MUBS
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Key Characteristics of Socioecology Systems
– Boundaries of players may expand taking on
more and more from each other
– “Nested” in reality and practice
OR
– Existing within living distance of each other
– Failure to co-evolve leads to devouring one or
the other instead of co-growing
Prof J.C. Munene PILA Consultants / MUBS
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A View of Contractor Socioecology /
Governance System Components
Tool: Performance Management (e.g. Balanced Score Card)
President
Actors / Players?
Object /Goal =
Compliance ?
GIC
Governor
Rules?
Outcome =
Competitive
Services &
Products ?
Cabinet
Secretaries
Community?
Division of Labour?
Prof J.C. Munene PILA Consultants / MUBS
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Uncoordinated Evolution of Contractor Nested
Systems: Impact on Competitiveness?
Tool: PM (e.g. BSC)
President?
Actors / Players?
Compliance
Competitive
Products &
Services
GIC?
Cabinet
Secretaries
Governor?
Rules?
Community?
Division of Labour?
Prof J.C. Munene PILA Consultants / MUBS
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A View of Agent’s Socioecology / Governance System
Components
Tool: P M (e.g. BSC)
GIC
Actors / Players?
State
Corporat
ions
State
Agencies
Rules?
Community?
Object?
Outcome?
NACAO
O
Division of Labour?
Prof J.C. Munene PILA Consultants / MUBS
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Uncoordinated Evolution of Agency Nested Systems
Tool: PM
GIC
Actors / Players?
Object?
Outcome?
State
Corporations
State
Agencies
Rules?
NACAOO
Community?
Division of Labour?
Prof J.C. Munene PILA Consultants / MUBS
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The Focus of Corporate Governance
Fostering business efficiency and
competitiveness
2. Strengthening shareholders' rights and third
party protection
1.
– Triggered by corporate scandals, bankruptcies and
skyrocketing CEO compensations
Prof J.C. Munene PILA Consultants / MUBS
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Two Dimensional Problem
 Systemic composition and structure
– A team task (of agents and contractors) rather than an individual task
– Success depends on coordination, collaboration, and communication
– It is about co-evolution
 Combining shareholder and stakeholder interests
Prof J.C. Munene PILA Consultants / MUBS
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Difference between the 2 Corporate Governance Approaches
Purpose
Maximise shareholders'
return/wealth
Pursue multiple objectives of parties with
different interests
Governance
Structure
Principal-agent or
Shareholder supremacy
model
Team production model
Governance
Process
Control
Coordination, cooperation and conflict
resolution
Performance Shareholder value sufficient
Metrics
to maintain investor
commitment
Fair distribution of value created to
maintain commitment of multiple
stakeholders
Residue risk
holder
All stakeholders.
Shareholder
Prof J.C. Munene PILA
Consultants
/ MUBS 2000/Ayuso & Argandona, 12
(Kochon
& Rubinsten,
2007)
What to Implement and to
Institutionalise
 Shareholder perspective
 Comprehensive, systemic, co-evolutionary
 Includes everyone in the “Nest”
 Self-reinforcing
Prof J.C. Munene PILA Consultants / MUBS
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Compliance: The Pivotal Object / Goal to
Institutionalise
 Legal compliance promotes a “freedom of indifference”
(letter of the law)
 Ethical compliance promotes a “freedom of excellence”
(spirit of the law).
Prof J.C. Munene PILA Consultants / MUBS
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Legal Compliance
 Conforming to industry, statutory and legislative obligations
and commitments
 Concerned with conduct
 Generally unitary rather than systemic
Prof J.C. Munene PILA Consultants / MUBS
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Ethical Compliance
 A cultural/value/ethical matter
 Builds relationships and trust within and outside the organisation
 Combines freedom with social accountability and responsibility
 Ideal for the systemic or the Socioecology of governance in nested
GOEs
Prof J.C. Munene PILA Consultants / MUBS
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Measurement of Board Performance: The
Tool for Compliance
– The Key to improving Board performance lies in:
Working relationships between the Board and Management;
Social dynamics of board interaction; and
Competence, integrity and constructive involvement of
individual directors.
Prof J.C. Munene PILA Consultants / MUBS
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Criteria of Board Effectiveness
1. Team task performance: Ability to control and serve
TMTs through monitoring and influencing strategy
2. Team performance: Ability to become and remain
cohesive
3. Effortful commitment to the control and service tasks
of any board
Prof J.C. Munene PILA Consultants / MUBS
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Control task
1. Personnel decisions regarding top management on
hiring, remuneration, and replacement.
2. Approval of major initiatives proposed by TMT
Prof J.C. Munene PILA Consultants / MUBS
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Service task
1. Providing expert and detailed insight during major events such as
acquisition or restructuring
2. Generating and analysing strategic alternatives during board
meetings.
Prof J.C. Munene PILA Consultants / MUBS
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A Measure of Board Member Performance
1. Time allocated to doing homework for understanding the company’s
problems.
2. Conducting diligent research on the company whose board a person
serves on
3. Participating actively in board discussion
4. Using real or mental calculators during meetings
5. Whether standards of high-effort are provided for in the boardroom
6. Carefully scrutinizing the information provided by the TMT prior to
meetings
7. Researching issues relevant to the company
8. Taking notes during meetings
Prof J.C. Munene PILA Consultants / MUBS
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A Measure of Team Effort: Creating Relational Agency
1. Team orientation: Effort norms, level of group cohesiveness, importance of team
2.
3.
4.
5.
6.
7.
membership, liking to work, with one another in the group.
Team leadership: Informal process of providing direction, structure and support for
other members.
Communication: Exchanging information in the prescribed manner to clarify or to
receive information
Monitoring: Observing the activities and performance of other team members
Feedback: Giving, seeking and receiving information on how team members are doing
Backup behaviour: Assisting other members to complete their task when they have
difficulties of execution
Coordination: Executing individual task timely and in an integrated manner.
22
Prof J.C. Munene PILA Consultants / MUBS
Agents of a Productive Sociotechnical System
Agent
Instrument
Location
Organisation
Strategy
Organisational Agency
Department/Function
Capabilities
Depart’l Agency
Individual
Role based
competences; attitudes
Individual Agency
Network; Emergent Teams
Interactions
Relational Agency
Prof J.C. Munene PILA Consultants / MUBS
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Way Forward: Institutional or Task Mode?
 The task mode of creating a functioning
network assumes agency at all levels
 It assumes consensus at all the four levels
 Focuses on project performance
 The institutional model assumes non
functioning agency at all levels
 Promotes a planting and a growing mode
 Focuses on institutional learning
Prof J.C. Munene PILA Consultants / MUBS
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One General Theory of Change for Institutionalising Innovations
Hiding
Hand
Uncertainties
Side
Effects Mixed
-Pure
Latitudes
Trait
Making
Trait
Taking
Institution
design
Project
Design
Project
Situated
Learning
Task
design
Task
performance
Project
Performance
Prof J.C. Munene PILA Consultants / MUBS
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Defining Institutionalising
 To institutionalise is to make an entity, an event, a practice
permanent in the minds of community and societal members
 It Means making the object of institutionalization valued so much
that generations will make every effort to maintain or restore what
has become institutionalised
Prof J.C. Munene PILA Consultants / MUBS
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Thank you for listening
JCM PILA Consultants
Prof J.C. Munene PILA Consultants / MUBS
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Prof J.C. Munene PILA Consultants / MUBS
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