Keynote Address -Entrepreneurial Leadership vis a vis Stakeholders-


Mr.Geoffroy Roux de Bezieux, CEO, OMEA Telecom/Virgin Mobile

Entrepreneurial Leadership vis a vis Stakeholders


– Is the corporate governance necessary for startup companies? Yes –

On the opinion of Mr. Geoffroy, corporate governance is an issue for all leaders of all size of business.

He always tells entrepreneurs, “You should lead your business as a small SOHO business when you look at your cash, but behave like you should become soon a big corporation when it about your governance”. It means when you start a business, you always focus on the resource which you are lack of. But if you want to be success, you should have “a big dream” from the very beginning. You should try to apply some basics principles as early as possible, even if they are in a light format. For example, deciding the compensation of the management shall be done with independent advice, even if the CEO is the main shareholder or the majority shareholder. By doing these things it is possible to avoid the potential conflict of interest. This is not easy for the entrepreneurs. They will be negative to any form of restriction against their freedom of action or external control. So the best way to convince them is to improve their governance in order to make their company ready for the next steps. If your company do get prepared, it will be a “big shock” when you want to go to the next step such like IPO, VC, etc.

-Successful entrepreneurs should always behave as external or public shareholding –

As a political point view, the revenue gap between the general public and business leaders makes people hardly believe CEO will behave in the interest of community of the social. This motion of public makes the regulation of country stronger. That is the reason why it is difficult to change the complicate labor law in France. AFEP/MEDEF started to reduce media controversy of CEO compensations recently. Although it has changed the public perception yet, it could be a hopeful way for the future.

– Good respect of the principles of corporate governance is positive to reduce the conflict between the company and society –

He suggested that the next step for fast growing companies is usually the arrival of a professional investor, venture capitalists and/or IPO. He has done a lot of IPOs in his career and he thinks that the difference between successful and failed IPO rely first and foremost on the business results. As the summary of the topic, he mentions that he believes successful entrepreneurs should always behave as external or public shareholding.

And lastly, he talked about the CEO’ sufferance that majority of French people distrust them and believed that they do not behave in the interest of the community of the country but just push their own personal interest, when the economic widen the gap between the general public and business leaders. From his tremendous experiences of careers, its takeaway is that a good respect of the principles of corporate governance by the big corporations has a positive impact of the perception by the media and the public and should then lead to a more favorable business climate for companies of all sizes.

< What we have learned as a Business School Student >

Multi-dimensioned aspect

“Lead your business as a small SOHO, (snip) but behave like you become soon a big corporation”.

It reminded that it is important to have both skill of manage small company and big company and aspect for both type of company in any phase of company. Mr. Geoffroy also mentioned “Successful entrepreneurs should always behave as external or public shareholding.” This message also reminded us multi-dimensioned aspect is the key success factor for entrepreneur.

Principles of corporate governance

We knew that being trusted by stakeholders is difficult for CEO. And to enlighten the stakeholders should be main role of CEO. He presented the Principles of corporate governance as a effective tool to realize it.


Written by Yayoi Aihara, Yinhui Wang, Hiroki Sawano (Keio Business School from Japan)

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How Integrity enables sustainable long-term performace

Integrity is in part of our day-to-day operations, the way we operate, the way we do things, and how we act together. Integrity among employees, dealers, suppliers, and customers creates efficiency that is hard to copy by our competitors, and that drives sustainability.

The keynote address for day 2 of the Council on Business & Society was from Mr.Pierre Guyot, CEO of John Deere France. The company existing over 175 years John Deere is the leading manufacturer of agricultural machinery in the world, and ranked in Fortune Top 50 “Most Admired” companies globally.

To create culture, it must start with the value, embed in doing business. The vast key is for a company is to be recognized and differentiated, and you need to make a difference, and make the value visible, and make people feel what it is.

But how we make those values live? In John Deere, people act and behave based on core value of integrity. To make it alive, they have three main strategies.①Strong guidelines and policies, ②a code of business conduct, and ③management process and decision-making based on ethics and compliance culture. Compliance is necessary to comply with many risks, however, integrity is more than compliance, but about the performance.

So how can it be integrated with the business?①Leaders have to lead by example, and ②embed ethical values in workplace discussions. There is ③no compromise with integrity, and ④must live with what and how you have accomplished things, since that is what makes us who you are, and makes us unique, and hard to copy for others.

Again, integration in all dimensions is what beat the competitors, and what enables sustainable long-term performance.

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PE Investments, Value Creation, and Social Consequences

Speakers: Jose-Miguel Gaspar, Professor – ESSEC; Vincent Gombault, Managing Director – Axa Private Equity; Jean-Louis Grevet, Founding and Managing Partner – Perceva Capital

Do we understand private equity well? At times, some cliches from the 1980s blur our understanding. The common perception of highly-leveraged buyouts with subsequent asset-stripping does not reflect current practices, as Jose-Miguel from ESSEC shows.

As LBOs boards meet more often, have more outside directors, the performance is more likely to increase. Private equity firms provide substantial help in terms of professionalization of management and reporting systems.

The median holding time being on average of 42 months, compared with that of institutional investors of public firms (27 months), we can see that the landscape of LBOs has changed.

Private equity, with about 13,000 funds managing about $3 Trillion USD, with 75% of funds going to LBOs, exhibit “persistence in performance”, needs some change in public perception.

Practitioners such as Vincent Gombault from Axa and Jean-Louis Grevet from Perceval brought valuable insights on such industry changes in Private Equity.

Perceval, who specializes in turnarounds, has three time horizons of value creation in his work: fix the balance sheet as it invests, fix operational issues in the medium time horizon, and start investing in the long term to develop sales and deploy.

Is this hard to negotiate with creditors while formulating a medium and long-term strategy, while balancing stakeholders such as employees and local authorities? Yes. But this may be an inspiring recipe for future value-creating business.

Eventually, value creation may stem from the ability to juggle with multiple time horizons. As different stakeholders have conflicting demands, the ability to use integrative thinking at the leadership level becomes more critical.

This has practical implications on management education, as decision sciences are becoming intertwined with negotiation classes and inter-temporal strategy formulation.

Perhaps, even, we may need to find a balance between maximizing realism in describing the context of decision making such as with systems thinking and its contemporary developments; and the need for efficient, more narrowly scoped number-driven decisions. This is also why this council asks the difficult questions, but the most pressing ones. #councilbusinessandsociety

~written by Donoxti Baylon

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Leadership of Family and State Firm Boards

Professor Per Sun, School of Management, Fudan University

Mr. Andre Chieng, President of AEC
Mr. Bernhard Simon, Managing Director and family spokesman on the executive management board, Dachser GmbH

The first speaker, Mr. Simon, is one of the 3rd generation in the family that behind Dachster GmbH. As a private business, Dachster emphasized its absolute independence in operation, which means its 16 shareholders are all family members. At the same time, Mr. Simon is proud of the stableness of the company’s operation and the trust with its customers that built upon it. This is quite different from my previous idea that family businesses tend to be more unstable because of the problems in succession issue. It then really interests me that how such family business runs and how it is different from the companies in common practices.

The differences turn out to be quite impressive. What Mr. Smith emphasized the most is that how company’s corporate governance separates the family issues from the company issues. In Dachster’s governance, family issues are resolved within “family office”, outside of company’s management, to minimize its influence on the running of business. The main task of family members, or the shareholders, is to appoint their representatives in the supervisory board and to review executives’ performance with external auditors. Furthermore, to ensure the independency of the management, only 2 of the 5 directors on board represent family members and currently the chairman of the board is from external. I believe all these arrangements are to ensure that the company is run by the most competent person instead of the owners. People may be well aware of this idea, but it is still extremely difficult for a family to limit its power in its own business and passes on this practice through generations.

Mr. Chieng then talked about the family business in China. Family businesses in China usually have shorter life in history than western ones and Mr. Chieng tried to explain this phenomenon based on China’s business culture. When a Chinese family looking for executives for their business, they highly value the security of their ownership and thus dislike ambitious managers. In many cases, this leads to incompetent management. Another possible reason could be family’s high involvement in firm’s management. Family business usually has strong personal character of the founder and it is thus quite difficult to pass on the power to founder’s successors or outsiders. These two points concur with my personal understanding of Chinese business, which I think currently is still more ruled by people instead of by regulations.

Mr. Chieng also talked about the state firms in China and claimed that the operation of those state firms still lack of efficiency and transparency. This idea sounds quite familiar and is not so interesting without the comparison with the western practices.

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Session 2.4: Board Crisis Management: China v. the U.S.

This session looked at the role of the board in corporate crises, comparing in particular the American and Chinese experiences. The panel brought together three speakers with significant, yet diverse experiences in corporate governance. Dean Paul Danos has worked in and around boards in the US and could bring in examples from his personal experience of dealing with crises as a board member. Mr. Stuart Cable is an experienced corporate lawyer and governance expert. Attending around 60 board meetings per year and representing about a dozen companies, he was able to offer legal as well as practical observations about the US system and how boards deal with crises.  Mr. Xiaozu Wang provided the Chinese perspective, having very closely studied and worked in the area of corporate governance in China.  I found this panel very interesting as it is in crisis situations that boards take on an active and therefore much more public role. Moreover, having lived and worked in both the US and China as well as in Europe, I am personally very interested in this topic and the practical challenges of doing business in different countries.

Many interesting points were raised during the session, but I would like to highlight two that stood out for me as key takeaways. First, there are both differences and similarities between how US and Chinese boards deal with crises. In the US, for example, several rules determine how the board can and should act in crisis situations. After establishing that “the buck stops in the board room”, Mr. Cable highlighted the ‘duty of care’, the ‘duty of loyalty’ and the ‘business judgment rule’ as basic principles on which the board makes decisions. Comparing the two countries, Mr. Wang pointed out that the Chinese stock market is just 22 years old and that until fairly recently most companies had just one major shareholder who had virtually all control of the company. As a result, while the legal framework in China is pretty much in line with the rest of the world, corporate governance in practice is still evolving as boards gain experience in dealing with various crises.

Second, it is a useful exercise to put oneself in the shoes of the board in various crises situations. Mr. Cable challenged the audience to think about various crisis situations and asked: What should the board do? The three situations discussed ranged from a company receiving an unsolicited letter with an offer to acquire the entire company for cash, to the company’s CEO being accused of sexually harassing an employee, to the SEC making enquiries about material misstatements in the company’s financial reports. In all three examples, the comparison between the Chinese and US legal systems and practices was enlightening. For example, in the case of an unsolicited acquisition offer, is the board obligated to engage in negotiations with this prospective buyer or can they say “No, thank you – now is not the right time”?  Mr. Wang noted that in China, this decision would normally not be brought to a board meeting, but discussed first with the major shareholder. In contrast, Mr. Cable noted that in the US the very first thing that would happen is that it would go to the board, which would establish a process on how to deal with the offer – this is part of the “duty of care”. Furthermore, it was noted that in the US, if the board has the choice between two proposals – $35 in cash and preserve all jobs or $38 in cash and significant layoffs in the company, the board has a fiduciary duty to take the higher offer as it needs to maximize shareholder value in the context of equal or no execution risk.

Overall, it was a very informative session, and the audience asked several interesting follow up questions on the various scenarios and how they would be handled in the US and Chinese contexts.


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Parallel Session 2.2: Women on Boards: Effects of Director Quotas

During the previous session on Trends in Board Leadership and Shareholder Engagement Policies – Karin Thorburn kicked off the discussion of women and corporate boards with an interesting overview of gender quotas, the Norwegian experience with quotas, and female effectiveness on boards. We headed into a breakout sessions to further discuss  Women on Boards: Effect of Director Quotas. Our sessions was moderated by Karin – with a short presentations by Susan Lindenauer, Noreen Doyle, and Viviane de Beaufort. I was excited to sit in on this breakout sessions as this was the focus of my independent research this term at Tuck.

Susan Lindenauer began the session by introducing some interesting statistics on the role women play in Corporate Boards, CEO, and Executive Officer positions. While the number of women in these roles is increasing – there is still a significant gap in gender parity. In 2011, women made up only 16% of board seats in Fortune 500 companies. At the same time, less than 1/5th of companies had 25% of their seats filled by women, and 1/10th of companies had no women at all on their boards. Susan also brought extensive legal insight to the discussion – she is a lawyer and previously served as the General Counsel to the Legal Aid Society of New York and has served on 8 non-profit boards. Susan noted that legal quotas in the U.S. are  constitutionally impermissible and not a mechanism which can be used to improve gender diversity.  Susan noted though, that while quotas aren’t the answer – boards need to become more diverse.

Noreen Doyle followed onto Susan by discussing her own experience as a women in the financial services industry who serves on multiple publically traded company boards. Noreen noted that she is frequently asked – what is the effect of women on a board? She joked, since she’s never been on an all male board, she can’t really comment. However, while she implied that boards need to become more diverse – she believes that quotas aren’t the answer. Interestingly though, Noreen noted that she was in favor of the threat of quotas and the changes they’ve influenced in both the UK through the Lord Davies commission and in Scandinavia  through proximity to Norway which has implemented a quota.

Viviane de Beaufort, a professor at ESSEC, finished off the short presentations by sharing with the breakout group her research on the relationship between women and power. Viviane has conducted 50 interviews with women leaders around the world to get a better sense of how women think about power, whether they feel isolated by power, and if women who hold positions of power act more like men in similar roles. The results seemed quite mixed – but Viviane’s research seemed to indicate that women believe that exerting power requires courage and that with power comes a sense of responsibility to help the women who are coming up behind them in their organization.

While these presentations were very interesting – the Q&A section of the breakout was really dynamic and created some intensive debate. The group discussed whether the a “threat of quotas” was really sufficient to create change.  We also has an interesting discussion about whether quotas were needed for males in female-dominated industries to ensure gender-parity across society. Karin noted that in most professions (e.g. medicine) the skill-set which is required is quite clear. While the skill-set for boards is less clear – which means there is a fear that board nominations are a function of networks – and not skills. Therefore, quotas are needed to break networks and allow individuals with the right skills, but maybe not the contacts, compete for board seats. Our discussion continued into the challenge of ensuring women move up within the management funnel so that they can even be considered for executive  level roles. Noreen noted, and Susan agreed, that in the 80s much of the hiring was 50/50 but that now the top management levels do not reflect this hiring. Likely, this is due to leaders at the top who are more likely to mentor – and pull up – individuals who look like them and frequently they are not women. Although the discussion could have continued for some time, we had to move on to our next session. I am looking forward to discussing this topic more over dinner tonight! #councilbusinessandsociety

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Corporate Governance – The German Answer to a Global Issue

Dr. Götz Schmidt-Bremme, Chief of Economic Affairs, German Embassy of Paris, and
Prof. Klaus-Peter Müller, Chairman of the Supervisory Board of Commerzbank AG and Chairman of the Government Commission on the German Corporate Governance Code


As Chief of Economic Affairs of the German Embassy in Paris, Dr. Schmidt-Bremme’s job is to accompany companies and to guarantee compliance of company actions with different stakeholder objectives. He introduced Prof. Müller by mentioning that Prof. Müller not only guides the second largest bank of Germany through the arising Corporate Government issues, but also promotes the German system of Corporate Governance having a wide acceptance in today’s business community.

Prof. Müller started by pointing out that Corporate Governance has to be seen as a global challenge. The different national perspectives have to be tackled from an international point of view. Referring to Rockefeller he saw the Council on Business and Society as a great chance to establish a platform to talk about those global issues. Especially the Asian countries should be included in Corporate Governance discussions due to their economic significance in the world.

In his opinion, good Corporate Governance means good corporate management as well as effective control of corporate management. Furthermore, the national Corporate Governance structures are decisive for the location of a company. As one major aspect of such Corporate Governance structures he emphasized the transparency principle. The German answer to this transparency issue within the German Corporate Governance system is the dualistic system where controlling and supervising activities play a major role. The self-contained bodies of the dualistic system shall ensure the independence of Management Board and Supervisory Board in particular. However, in the dualistic system the Supervisory Board does not only control the Management Board, but also gives advice to ensure better corporate management.

The dualistic system has proven to be a successful solution to the requirements of Corporate Governance. However, Prof. Müller admitted that there is no conclusive answer whether the Anglo-American monistic system or the German dualistic system is the better way of dealing with Corporate Governance. Both systems do have their advantages. The trends of Corporate Governance nowadays show that it is not enough to leave control simply to the capital markets and the shareholders of a company. Corporate Governance has to be seen from a stakeholder’s perspective. Therefore, the dualistic system takes on the stakeholder perspective by enabling the Supervisory Board to participate in the strategic management of the Management Board. The Supervisory Board thereby consists of members elected by the shareholders and employee representatives, also including union representatives. The Annual Meeting remains the “backbone” of the code.

After giving a short overview of the origins of the German dualistic system, Prof. Müller discussed its linkage to a social market economy and the social market equilibrium in an economic rather than in a political sense. The objectives of profit maximization, solidarity, responsibility of common goods, and the balancing of interests are supported by the dualistic system by including various stakeholder groups in the management process of the company.

Another important aspect of the dualistic system is its flexibility with respect to the about
90 recommendations (e.g. ensuring the independence of the Supervisory Board, etc.) suggested for the cooperation between Management Board and Supervisory Board. These recommendations are not legally binding and are based on voluntary acceptance. However, by singing the declaration of conformity submitted by the Supervisory Board the Management Board has to obey by the declaration. In case of incorrect behavior, legal actions can be taken. Prof. Müller further emphasized that “you do have to explain, but do not have to obey” as you are allowed to deviate to a certain degree if necessary and only if the reasons for the deviation are disclosed in the conduct.

Prof. Müller further highlighted that the dualistic system has a value concerning sustainability as an ethical principle. The sustainable economy is linked to the code as the German dualistic system serves as a yardstick for entrepreneurial actions. Those social and environmental issues ensure the long-term success of German enterprises by taking care of the nature and the environment as a whole as a common good.

Often, investors request transactions to entail risk in an amount resulting in excessive remuneration incentives which actually should be linked to a long-term and sustainable business performance. In Prof. Müller’s opinion, much more has to be done to link compensation to long-term performance of corporate management by e.g. including clawback provisions. He stressed out that outstanding performance should be remunerated and be rewarded, but that there must be limits to incomprehensibly high remuneration. Based on the transparency principle the dual system can make management actions more visible and thus, lead to a different behavior of those who ask for remuneration.

In addition, transparency doesn’t mean excessive regulations of Corporate Governance and control but rather might result in a uniform Corporate Governance framework. As it is difficult to come up with a uniform Corporate Governance framework, the first step is to encourage competition among the different types of corporate constitutions. He also mentioned that a flexible Corporate Governance code is favorable as enterprises have to be able to act in an entrepreneurial way as they have to respond to new questions. New questions arise on a daily basis and can’t be all regulated in advance. The same is true for the risk of failure: It can’t be eliminated in advance and will remain the price of freedom and flexible regulations. However, flexible regulations will enhance the faster reaction to new issues and risk.

In Prof. Müller’s opinion “we will never achieve more than commitment of the individual and the acceptance by the society”. As the students valued “ethical behavior” as the second highest attribute of a successful CEO, he wanted us to accept a challenge of re-thinking solutions via different systems of Corporate Governance.

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