BGN Entrepreneur

The term of corporate governance is becoming increasingly important to businesses of different natures, as one of its most important themes is to ensure the accountability of certain individuals in an organization via mechanisms that try to reduce or eliminate the principal-agent problems. Effective and efficient corporate governance is crucial to a company’s success as it cast great impact on the organization’s major investment decisions and the corporate governance systems can greatly influence the economic efficiency and shareholders welfare in the organization.
The concept of corporate governance is multi-faceted subject. It refers to a set of processes, customs, policies, laws, institutions, as well as corporation goals. These factors are affecting the way a corporation is directed, administered or controlled.
Meanwhile, the stakeholder relationships are also included. The principal stakeholders are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. If not handle properly, the loss of gain in main pricipal in a business organization will greatly affect its stock price in the market.
The most recent case concerning this aspect is future leaving of Ken Hanna, demerger architect of Cadbury.
After joining in 2004, Ken Hanna, Cadbury’s chief financial officer who oversaw the demerger of the confectionery giant from its US soft drinks business, is going to leave the company in April next year. He’ll become chairman of Inchcape, which is the UK car dealer where he has been a non-executive director since 2001, in replacement Peter Johnson, who just announced resigning earlier this year. As Hanna has been playing a central role in radical restructure the business both from an operations and a portfolio perspective, his leaving is going to cause certain chaos within the organization to some extent.
Most of the time, in similar cases, the key principals will first step down for non-executive roles before they finally leave. Within this transition period, the authority of the key principals will be gradually passed to the executive board and the new leaders will be given the opportunity to get further familiar with the new situation. Meanwhile, this action will help reduce the sudden panic within the organization, which might be caused by the loss of key leaders. The approach also makes it easier for the insiders to accept the internal change slowly.
Similar approach was also taken by the Pernod Ricard Group, when Richard Burrows, joint director general of the group, determined to retire in the year 2005.
So far, Cadbury is busy preparing for this issue with quite open and positive attitude. And the company has begun a search for Mr. Hanna’s replacement.

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