THE INSURANCE INDUSTRY
Corporate Governance: Issues
and Challenges
An Industry Offering Services to
Stakeholders
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Protection against financial loss: offering some
reimbursement for losses actually incurred.
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Minimizing risk: enabling the insured to pursue business
and other activities with relative confidence.
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Ensuring reliable support: for survivors who would
otherwise be unable to continue a positive existence.
Corporate Governance
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The process by
which enterprises
are made
responsive to the
rights and wishes
of stakeholders.
Demb & Neubauer, 1992
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The relationship
among various
participants in
determining the
direction and
performance of
enterprises.
Monks & Minow, 1995
Parties to
Corporate Governance
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Board of directors
Management
Shareholders
Employees
Customers
Suppliers
Regulators
etc.
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All parties have an
interest in the firm’s
performance. They
make inputs, but also
have needs and
expectations that
corporate
governance should
try to meet.
Stakeholders’ expectations

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Customers: Services as
promised.
Employees: Job
satisfaction
Investors: Good returns.
Business Associates:
Stable relationships.
Community: Social
responsibility.
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Government: Fulfilment
of statutory obligations.
ALMIGHTY GOD: the use
of all resources according
to His will.
All stakeholders have
the right to demand
FULL ACCOUNTABILITY.
RESPONSIBILITIES OF THE FIRM
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Fulfilling the long-term goals of the enterprise
Considering & caring for employees’ interests
Maintaining excellent relations with business
associates
Maintaining proper compliance with statutory
requirements
Taking account of the needs of the environment
CORPORATE GOVERNANCE: The
core issues
The firm offers fair returns for each
stakeholder’s input;
 The firm displays high business standards;
 Different interests are equitably managed;
 Executives handle fiduciary responsibilities
conscientiously;
 The firm practises good ethics and
accountability.
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The Functions of the Board
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Reviewing & approving corporate strategy
Approving budgets & reviewing performance
Ensuring cost-effective management of corporate
resources (especially the human resource)
Managing top appointments & succession
Ensuring compliance with statutes
Reporting to stakeholders
Reviewing board performance
THE BOARD AND MANAGEMENT:
Corporate Success – a shared focus
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An identity of
objectives and
interests
Mutual
accountability
Joint focus on the
interests of
stakeholders
Commitment
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Collaboration, not
competition
Team spirit, mutual
confidence &
respect, clarity of
respective roles
Free and
constructive sharing
of information
A STRATEGY CHECKLIST
for Board and Management
What business(es) are we in?
 Are we (still) in the right business?
 Are our corporate objectives reasonable,
appropriate and clearly defined?
 Are we in the right position in the market?
 Are we utilizing and managing resources and
assets efficiently? …..
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STRATEGY CHECKLIST (continued)
Are our human resource policies effective for
finding & retaining good people?
 What is our track record in community and
environmental responsibility?
 What is our business ethics record?
 What are the threats to our business?
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DIVISION OF ROLES:
Sensitive Issues for the Board
“Direction” of the business;
 Appointments to Board positions;
 Terms & conditions for executives;
 Managing the performance of senior
executives;
 Determining executive compensation;
 Ensuring effective executive
succession.
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THE VALUE-ADDING BOARD
An external perspective
 A dimension of competent objectivity
 Supportive criticism of management
 Informed appraisal of the business
 A friendly ear in times of difficulty
 The custodian of accountability
 The moderator of conflicts of interest
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The Enterprise of Tomorrow
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Who will be our customers/stakeholders?
What needs/expectations will they have?
How will goods/ services be delivered?
What new delivery competencies must we have?
How will the competencies be acquired?
Competition, globalisation – what are the terms?
What actions must we take – now – to be ready?
Establishing business integrity
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Determine and articulate the values cherished
by the enterprise.
Establish clear ground rules – code of practice indicating
standards and procedures.
Specify the consequences of off-standard conduct.
Communicate clearly to all concerned.
Audit the observance of discipline frequently.
Apply agreed rewards and sanctions impartially
and consistently.