Friday, August 31, 2007

34th Asian Regional Training & Development (ARTDO) International Conference, Bali August 28-31..continuation...



















I got back from Ngurah Rai last night,touching down at LCCT at about 15 minutes just after midnight and just-in-time to see the fireworks of our 50th MERDEKA celebrations at Putrajaya, from the air. My first experience flying AirAsia heheh. All I can is that...it was fun and you can be rest assured that that won't be the last time I fly AirAsia..hihi. Caught up with long lost friends at ARTDO in Bali. Made some new ones. Great networking but most importantly, immediately after the usual boring opening ceremonies, was my presentation and the panel session. I deliberately let the other two speakers go first...heheh so that I will have the last bang. Aaah...and yezzzeh...a bang it was...hihi. The delegates generally, kinda like my 'Professor Dumbledore character in the famed Harry Potter series' slide...and the corporate governance joke...but only two people laughed at my 'right exposure joke'...and who might that be? none other than my fellow malaysians...and long time friends Dr Palan executive chairman of SMR and Datuk Yau de Piyau the current CEO of HRDF Malaysia....hahaha.

The day before, on the Garuda flight from Jakarta to Denpasar, I met Bapak Gudadi B Sasongko, who is attached to the Indonesian Department of Foreign Affairs at the East Asian, Asia-Pacific and Africa Directorate. You would straightaway know that he is an embassy guy...pleasant smile, always helpful, global in outlook and very diplomatic, from the brief conversation I had with him while walking to Garuda Indonesia's A330-300 Airbus. Oh ya...he happens to also know my cousin, Ibu Palupi who was at the Indonesian Embassy in KL for a while, now in Jakarta but about to leave for another overseas posting again. Yes, she is indonesian and Javanese. No, I am not Indonesian but proud to be a Javanese...hahahahahaha. its so therapeutic when people come to smiling, saying that they like your presentation, asked for your business card, come sit beside you during lunch, continue discussing the subject both in a scholarly manner as well as looking at it from the real world perspective...what is really going on .. on the ground, heheh...

Oh yes I forgot, during the panel discussion I also took the opportunity to congratulate the Indonesian Government for incorporating Corporate Social Responsibility (CSR) into their Corporate Laws and I was told that they are the first nation in the world to do that...followed by a loud applause by the delegates but ....alas...according to Bapak Irwan my Aceh fellow panelist, who is also MD of ING Indonesia in Jakarta and also a member of the Indonesian Corporate Governance Committee said that..that move by the Government did not go down well with the Corporate or Private Sector in Indonesia...hmmmm...according to him, their worries are of an impending moral issues or degration along the way...especially in the implementation context..I was surprised and I said that Bursa Malaysia view that initiative as a great stride in efforts at promoting CSR and I took the opportunity to propagate my worldview that...following Gabler's 'Re-inventing the Government' published in 1992 where in a nutshell he said: that some things the government must do; some are best left to the Private Sector and some, in order to derive optimum economic benefits...must be done through Cooperatives...' and following that thinking...i said...in Asian economies like ours...there must always be government-industry collaboration...rather than interference or intervention... so that redundancies and wastages could be substantially reduced.
I am also uploading a couple more pictures of Bali by night....and a videoclip of this good rock band performing on wednesday nite (ladies nite heheh) at Hardrock hotel...while i enjoyed it very much but the thought of the series of bombings in Bali a few years ago...made me leave the place in a hurry...hahaha....and of course....the paper I presented at the conference is also uploaded below:



34th Asian Regional Training & Development (ARTDO) International Conference August 28-31, 2007 Bali, Indonesia

HRM & Corporate Governance: Strange Bedfellows?

by Khaeruddin Sudharmin MBA(Hull, UK), Fellow PWI(UK), LS 007037
Group Company Secretary HeiTech Padu Berhad &
Managing Director/CEO Motordata Research Consortium Malaysia
in partnership with THATCHAM United Kingdom
tel: +6019 3224344

emails: khaeruddin@e-mrc.com.my
ksudharmin@gmail.com

websites: http://www.heitech.com.my/
http://www.e-mrc.com.my/

Abstract

Human Resources (HR) is obsessed with ‘How can we ensure that HR is at the table – and not on the table? Ulrich (2001) contends that there are four possible styles or routes that HR can take: work organization; employee champion; agent for change; and strategic business partner. Practitioners become a fully contributing member of the management team, who is able to participate in the corporate planning process and bring the expertise of HR into the equation with the responsibility to demonstrate how HR can add value and give competitive advantage to the organization. Corporate Governance (CG) on the other hand, is an idea whose time has, it seems, resoundingly come. The remit of CG covers a wide field. Essentially, it has four key issues that will underpin both success and failure in organizations. They are: culture and tone at the top; the CEO; the Board of Directors; and internal controls. It is also about the relationship between the board and its shareholders; the composition of the board and its committees; the remuneration of executives; the salience of the audit committees; and not least, the concepts of openness, disclosure, and transparency. Nobody seriously quarrels with the rapidly evolving trend in CG. How could anyone take issue with laws and regulations and rules and codes that are designed to encourage listed companies to conduct their affairs properly and in their own interest? Clearly the concept of both HR and CG continue to catch the imagination of writers on management and of many managers themselves. This is not surprising for it is clear from a range of research around the world that many contemporary organizations are faced with unprecedented environmental change and that speedy and effective adaptation is the key to survival.

Apparently, HR and CG has a series of common denominators beginning with: in that the consolation is the consequent toning-up of management, leading to enhanced performance, which will be, in turn, reflected in the share price, and that both HR and CG are at the strategic level of the firm. At the extreme end of the continuum, HR is a board level issue and CG is also a board level issue. Both have strong legal frameworks. In today’s heightened global awareness and concern for people and the environment, it would be suicidal for organizations not to adopt an integrated approach to harnessing both the strengths of HR and CG, propagate a symbiotic relationship between the two (HR & CG) that can enhance both their strategic roles. In an economy increasingly based on knowledge and people, linking HR initiatives to business strategies and to significant increases to shareholder value is the order of the day. The HR field has been under much scrutiny and in great need for change. It would be frivolous to pass on the opportunity of converting the rhetorics of CG into reality by cascading the whole concept and architecture of CG to all levels of staff. The author suggests that an impending strategic alliance between HR and CG could be viewed by some cynics as strange bedfellows.




Introduction

Ladies and gentlemen,

To talk to a network of social scientists, HRM and HRD experts, professionals and academics who belong to corporations, research and training institutions from both the public and private sectors in the Asia-Pacific region, one must also be a scientist in his or her own right! (quipped a friend of mine recently!). And when we talk of scientists and sciences, the fundamental natural imagination would be a set of dissection kit and each and everyone of you ladies and gentlemen, armed with a scapel in your hands, ready to dissect me! When I received an email from the organisers giving me the go-ahead to speak on “HRM & Corporate Governance: Strange Bedfellows?”, to a group of professionals and academics who are already experts in their field, I am inclined to essentially engage in distillation; and such a process may be thought incapable of doing justice to what could have been a lifetime’s grinding labour for some. At worst, I could be accused of trivialising by simplifying. Or if I may borrow Montaigne’s (French moralist and essayist, 1533-1592) words, that it could be said of me in this paper, I have only made up a bunch of other men’s flowers, providing of my own only the string that ties them together. The endeavour has been to share with you distinguished delegates, some ideas and theories and while accuracy has always been striven for, events may already have outdated some of what will be said here!

The theme of the 34th ARTDO International conference is “Human Resource Management – People and the Environment” with the objective of accelerating human resource development to an optimum level. We shall not dwell too much on the semantics as to what is HRM and what is HRD and one can arguably debate till the cows come home as to what is meant by HRM or HRD and the similarities or differences thereof. I will adopt an approach that will enable HRM and HRD to be viewed interchangeably whilst cognizant of the empirical evidences and massive literature available as to their definitions per se. The timeless quest as we are all too familiar with, is the holistic approach to human resource management: i.e., linking people with their creator (spiritual); people with people (social); and people with the environment (nature). It seems fashionable these days to relate much of management and stewardship of organizations both public and private, to be tied somehow rather with ‘global warming’. It may be a figment of an imagination to some views, but facts and figures we read, the experiences, and recent phenomena, is a scary wake-up call for everyone. The threat of an impending global warming is real and is here. How can HR practitioners at large, look beyond their mere tools and systems in leading their ‘measurement managed’ HR architecture or as mere strategic powerhouses in today’s organisations? The Strategic HR Scorecard (Becker, Huselid, Ulrich 2001) outlines a powerful measurement system that highlights the indisputable role HR can play as both a prime source of sustainable competitive advantage and a key driver of value creation much in opposition to Porter’s contention in his famous five diamond theory that HR is only a supporting operational role in the overall strategic intent. This HR scorecard is designed to embed human resource systems within a firm’s overall strategy and manage the HR architecture as a strategic asset. The model promises to link HR’s results to measures – such as profitability and shareholder value which we will see later on where I am getting at. The authors further argues that HR’s strategic role begins with designing an HR architecture –the HR function, the HR system, and strategic employee behaviours – that relentlessly emphasizes and reinforces the implementation of the firm’s strategy. If I can then crystallize, Human Resources (HR) therefore, is obsessed with ‘How can we ensure that HR is at the table – and not on the table? Ulrich (1998) contends that there are four possible styles or routes that HR can take: work organization; employee champion; agent for change; and strategic business partner. Put in another way, practitioners then become a fully contributing member of the management team, who is able to participate in the corporate planning process and bring the expertise of HR into the equation with the responsibility to demonstrate how HR can add value and give competitive advantage to the organization.

Corporate Governance (CG) on the other hand, is an idea whose time has, it seems, resoundingly come. Corporate Governance is defined as…”the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long-term shareholder value whilst taking into account the interest of other stakeholders” (the Malaysian definition as per the Finance Committee on Corporate Governance Report, February 1999). According to Anglo-Saxon definition, Corporate Governance refers to the set of mechanisms designed to maintain an appropriate balance between the rights of shareholders and the need of the Board and Management to direct and manage the corporation’s affairs and ensure the company optimise over time, the returns to shareholders” (McKinsey & Company). The Cadbury Report 1992 refers to corporate governance as “…the system by which companies are directed and controlled. Board of Directors are responsible for the governance of their companies. The shareholder’s role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate structure is in place.” The remit of CG covers a wide field. Essentially, it has four key issues that will underpin both success and failure in organizations. They are: culture and tone at the top; the CEO; the Board of Directors; and internal controls. It is also about the relationship between the board and its shareholders; the composition of the board and its committees; the remuneration of executives; the salience of the audit committees; and not least, the concepts of openness, disclosure, and transparency. Dr Madha Mehra, president of the World Council for Corporate Governance says that “…good governance is not simply about corporate excellence. It is the key to economic and social transformation. The corporation of today are no longer sheer economic entities. These are the engines of economic and social transformation.” Nobody seriously quarrels with the rapidly evolving trend in CG. How could anyone take issue with laws and regulations and rules and codes that are designed to encourage listed companies to conduct their affairs properly and in their own interest? The Conference Board Governance in the USA for instance, has, in response to continuous developments in the realm of corporate governance, a new handbook to assist board of directors in the performance of their duties. It is an up-to-date compendium organised by the variety of functions in the director’s job description, including: nominee selection and election process, diversification of professional expertise and background, delegation of authority to board committees, conduct of board meetings, adoption of governance guidelines, succession planning, engagement of outside compensation consultants, disclosure procedure and internal control oversight, strategy design and risk governance and appropriate D&O liability insurance coverage. In the US especially, due to the complexity of the legal environment and the pressure exercised by multiple constituents inside and outside the company, directors face today, a number of challenging issues. Following the 2002 enactment of the Sarbanes-Oxley Act, there has been more than twenty (20) major SEC rulemakings aimed at enhancing public disclosure, removing conflicts of interest, making management more accountable, reinforcing the authority and effectiveness of gatekeepers (outside auditors and securities analysts in particular), strengthening the pay-for-performance equation, and improving transparency. Much like a ‘best practice’ guide. Highlighting as well, the influence of shareholder activism in the boardroom, and investors in the US expects board members, not regulators, to be the leading force in corporate governance in the future.

(World Governance Indicator table is as the image above)

Closer to home, Malaysia, His Excellency The Honourable Deputy Prime Minister at a keynote address at the seminar on the National Integrity Plan on 8 August 2005, said that “…there seems to be a growing demand for corporations and organizations to be more socially accountable. The call for increased corporate social responsibility is becoming louder by the day. Corporations and organisations would do well to heed this call.” This, is what we mean by taking corporate governance one step further. Corporate social responsibility (CSR) the next level of corporate governance, is about what businesses do and how their actions impact the environment and society at large. The intent of business therefore is not just about creating wealth alone but doing it responsibly. Public concern and consumer opinions can influence business performance and this can translate to the company’s bottom line.

Clearly the concept of both HR and CG continue to catch the imagination of writers on management and of many managers themselves. This is not surprising for it is clear from a range of research around the world that many contemporary organizations are faced with unprecedented environmental change and that speedy and effective adaptation is the key to survival. We have also witnessed so far, how HR and CG are orchestrated in organisations. Both private and public organisations. They are separately championed. Some occupy not so strategic a level in some organisations. Some, are in strategic positions but encounter operational and execution problems. It is a typical organisational problem. Both in terms of structure and strategy. And we know that following the famous dictum that ‘structure follows strategy’ as propagated by Alfred Chandler the management guru, whereby he created en passant the very concept of structure which is not to be confused with organization. More often than not, strategic alliances among functional areas are viewed as unworkable by the very nature of their inward looking strategic myopia and the constant quest of ‘doing it alone’ perhaps also because their leaders simply want to be ‘little napoleons’ in their organisations. In the case of HR and CG becoming strange bedfellows, the author contends that there are commonalities which can result in a win-win situation. Firstly, both HR and CG are at a strategic level in the organization. Secondly, both have solid legal frameworks. Working together, HR and CG can ensure that the virtues and ideals of CG does not remain as rhetorics only at board level but are cascaded to every level of the organization and who would be in the most effable position to carry that out if not for the HR boys (and girls!)? Strange bedfellows as it may, the author contends that the strategic alliance between HR and CG may, yet again herald a new dawn in interpretations of cooperation and co-opetition at both the micro and macro levels of organisational theory. It does not just sound good theoretically, but it would be interesting to study companies who will would be brave enough to adopt this proposal and probably reap decently handsome profits whilst at the same time fulfil the very loud global demands for corporate social responsibility. The writer believes that Good HR practices coupled with honest and genuine upholding of generally accepted corporate governance practices, will put organisations in good stead in whichever society one is in.

Let me reiterate that it is apparent that HR and CG has a series of common denominators beginning with: in that the consolation is the consequent toning-up of management, leading to enhanced performance, which will be, in turn, reflected in the share price, and that both HR and CG are at the strategic level of the firm. With changing demographics and a greying workforce in developed and developing nations, competition for scare and quality human talent will intensify, making sustainability essential to attract a good workforce. Many business case studies have shown that people naturally desire to work for companies they believe are contributing positively to society. Furthermore, companies that employ CSR/CG-related perspectives and tools usually create an environment for increased loyalty and commitment from employees. By maximizing benefits, providing work incentives and equal-opportunity promotion opportunities, flexible conditions, training and career development, all of which are frequently addressed in CG/CSR exercises, companies can recruit desirable employees, retain them, motivate them to develop skills, and encourage them to pursue learning to discover innovative ways to not only reduce costs but to also identify and take advantage of new opportunities that spell business potential and reduce risks. Studies have also shown that companies that do not demonstrate such engagement, i.e., sound corporate governance practices, will continuously be saddled with high staff turnover, recruitment costs and low productivity.

At the extreme end of the continuum, HR is a board level issue and CG is also a board level issue. Both have strong legal frameworks. In today’s heightened global awareness and concern for people and the environment, it would be suicidal for organizations not to adopt an integrated approach to harnessing both the strengths of HR and CG, propagate a symbiotic relationship between the two (HR & CG) that can enhance both their strategic roles. In an economy increasingly based on knowledge and people, linking HR initiatives to business strategies and to significant increases to shareholder value is the order of the day. The HR field has been under much scrutiny and in great need for change. It would be frivolous to pass on the opportunity of converting the rhetorics of CG into reality by cascading the whole concept and architecture of CG to all levels of staff. The author suggests that an impending strategic alliance between HR and CG could be viewed by some cynics as strange bedfellows.

Thank you.

References:

The Hidden Leverage of Human Capital, Jeffrey A Oxman, MIT Sloan Management Review, Summer 2002 Vol.43 No.4

Best Practices in Human Resources, Case Study III (Leadership Development Programs), National Productivity Corporation Malaysia, February 2005

The HR Scorecard: Linking People, Strategy and Performance, Harvard Business School Press, 2001

Reforming Corporate Governance in South East Asia: Economics, Politics and Regulations, Institute of South East Asian Studies, Singapore, 2005

Strategy Synthesis, Bob de Wit & Ron Meyer, Thomson Learning, UK, 2005

World Governance Indicators, New Straits Times, Wednesday, July 11, 2007-08-19

Sustainability: Taking Corporate Governance One Step Further, Vol III, The Association of Chartered Certified Accountants (ACCA), August 2005

The Conference Board, Corporate Governance Handbook 2007: Legal Standards and Board Practices, Matteo Tonello, PhD

Good Governance: Towards Organizational Effectiveness and Integrity, Malaysian Institute of Corporate Governance, Kuala Lumpur, 2007


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