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Table of Contents
  1. Governance
    1. Definition and background
      1. What is governance
      2. Why it is needed
      3. Philosophical background
      4. Reflection
    2. Main elements
      1. Governance institutions
      2. Reflection
    3. Theoretical approaches
      1. Main theoretical components
      2. Shareholder approach
      3. Agency theory
      4. Shareholder approach
      5. Corporate Social Responsibility theory
      6. Transaction-cost theory
      7. Reflections
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TIØ5210: Programme and Portfolio Management

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Governance

Definition and background

What is governance

  • Good and transparent management of firms and institutions.

  • External management, not internal.

Why it is needed

  • Avoiding scandals like Enron, Worldcom, bank crisis

  • Changes in laws and regulations like Sarbanes-Oxley (US) and the Higgs report (UK).

  • Establishing the framework and boundaries for good and transparent management

Philosophical background

  • Neo-liberalism: Humans are not steered directly but through the norms and other subtle forces in society

  • Governance includes laws, guidelines and frameworks that shape, but not determine directly, conditions for ordered rule and collective action)

  • Making people responsible for their conduct. (Freedom and responsiblity).

Reflection

  • What is the relationship between governance and management?

  • If the Boards of Directors of a company tries to interfere directly into the management of a project, what have they misunderstood about their roles and responsibilities, as seen from a Governance point of view?

Main elements

Governance should regulate how we develop and use methods and processes that shape:

  • Defining objectives: The strategic focus
  • Choosing the appropriate means: Acquiring, utilizing and maintaining resources through plans, budgets etc.
  • Controlling performance: Supervision of appropriate use of resources, value creation processes and impact on environment

Governance institutions

  • Governments, public agencies, etc.
  • Board of directors, auditors, etc.
  • Sponsors, steering groups, etc.
  • Program and Portfolio managers
  • Project Management Office
  • Line managers
  • Standards, guidelines, etc.

Reflection

  • What should a governing body do if they don’t like the contents of project’s objectives?
  • How and to what extent is the governing body responsible if the project is not capable of producing the intended result?

Theoretical approaches

Main theoretical components

  • Actors: Act within the system, complying or counter-acting. Both the regulator and the regulated are parts of the same system.
  • Institutions: Structures, frames, policies, regulations, roles and responsibilities that shape the actor’s context.

Shareholder approach

  • Chicago School of Law and Economics
  • Maximizing shareholder’s return on investment
  • Focus on quantitative financial objectives
  • Management actions in accordance with shareholder interests

Agency theory

  • Principal-agent approach
  • Possible conflicts of interests
  • Imperfect control
  • Realigning the agent’s interests with the principal’s

Shareholder approach

  • Create value for stakeholders inside and outside the organization
  • Balancing conflicting interests and claims
  • Coping with many different objectives, resources and evaluations

Corporate Social Responsibility theory

Transaction-cost theory

  • The contract as the primary governance mechanism
  • Minimize transaction costs
  • Make-or-buy decisions

Reflections

  • To what extent can and should actors and institutions be independent of each other?
  • To what extent should the Governance approach be the same for all projects or tailor-made to each project?

Written by

Hamlet
Last updated: Fri, 20 Jan 2023 10:34:42 +0100 .
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