TIØ5210: Programme and Portfolio Management
Governance
Definition and background
What is governance
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Good and transparent management of firms and institutions.
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External management, not internal.
Why it is needed
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Avoiding scandals like Enron, Worldcom, bank crisis
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Changes in laws and regulations like Sarbanes-Oxley (US) and the Higgs report (UK).
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Establishing the framework and boundaries for good and transparent management
Philosophical background
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Neo-liberalism: Humans are not steered directly but through the norms and other subtle forces in society
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Governance includes laws, guidelines and frameworks that shape, but not determine directly, conditions for ordered rule and collective action)
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Making people responsible for their conduct. (Freedom and responsiblity).
Reflection
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What is the relationship between governance and management?
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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.
Agency theory
- Principal-agent approach
- Possible conflicts of interests
- Imperfect control
- Realigning the agent’s interests with the principal’s
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?