Establishing Transparent Corporate Governance Structures & Processes for Internationally Operating Companies

The emissions scandal in the automotive industry, with provisions of up to 18 billion US $, is another example of a lack of transparency in corporate decision-making structures. Regaining the trust of investors, employees, and customers requires a structured program, particularly within the framework of establishing governance structures.

In the past, the topic of corporate governance was understood and implemented in different ways. Non-transparent structures were caused by internal decision chains that, on the one hand, align with company-specific requirements and, furthermore, must satisfy the mere demand of legal requirements. Especially for internationally operating companies, singular structures were driven out of line functions. When making decisions, the operating result was often reported pragmatically from the bottom up. Historically, subsequent project results or organizational situations were quantitatively processed and management was informed after the fact. A reactive process with tunnel vision for one's own cause often led to necessary subsequent corrective measures—in extreme cases, to damage compensation, because decisions were not understandable or were made contrary to guidelines.

Confusing group structures lead to low transparency and ambivalent overlaps of responsibilities. Decisions are not distributed on the right shoulders or are placed on too many shoulders. The results of these situation-driven processes lead to a loss of reputation for internationally based companies and cause them financial damage. Recent examples in the banking sector have built up provisions in the billions to account for current and future legal disputes. Clarifying internal analyses to process past decisions often fail to deliver the required transparency as a result.

An Approach Worthwhile: Establishing Top-Down Decision Structures to Control Proactive and Tool-Supported Decisions

Penalties resulting from non-transparency and violations of local as well as international laws force a strategic rethink. Companies drive corporate governance structures from a staff function, in cooperation with and based on an understanding of the various departments. These are now defined top-down. The holistic approach enabled by this supports cross-departmental decision-making structures with clear communication chains. Control elements integrated in advance, taking various risk factors into account, reduce potential risks as well as costs and create clarity regarding responsibilities. Increased networking of responsibilities leads to the desired transparency, which, among other things, has positive effects on "Business as Usual" (BAU) and project timelines.

This result cannot be guaranteed without the prompt involvement of IT functions. As a cross-departmental function, IT is the "means to an end" and must therefore be included in the development process.

Conclusion

Ensuring that decisions are made in the interest of the owners and in compliance with the law remains a challenge, but one that becomes controllable through appropriate processes and IT.

A clean, upfront establishment of processes avoids damage compensation. Supported by tools as well as risk reduction, this should lead to the desired cost savings. A top-down solution approach requires the strategic alignment of all processes as well as their IT-supported implementation. Provisions for damages become controllable through setting up reporting and decision structures. The demand for transparency, clear reporting, and independent decision-makers, as well as the implementation of professional documentation supported by innovative technical solutions, is an answer to this problem.