Assessing Incentive and Monitoring Schemes in the Corporate Governance of Maltese Co-operatives

Abstract

1. Introduction The fast rate of technological change - both with regard to ICTs as well as the amount of information that society has as a whole -, the appearance of new segments of consumers, the liberalisation and deregulation of the financial markets, coupled with a simultaneous increase in the globalisation of markets and the development of major economic areas represent a growth opportunity for financial institutions. However, these incipient forces also represent new risks that could seriously threaten the survival of businesses if they fail to prepare a strategy that enables them, firstly, to minimise these risks, and secondly, to take maximum advantage of the new opportunities generated. To address the global environment, with a lot of competition and uncertainty, financial institutions need to set and establish a strategy that enables them to confront the new values and preferences of consumers, the actions of their rivals and the forces of the technological, economic, political-legal, socio-cultural or demographic macro-environment. More specifically, the more information that consumers have means they demand increasingly higher levels of quality and variety in the products and services offered. Simultaneously, the progress of telecommunications requires banks to compete in the market ever more based on the use of the best services. Furthermore, the ever faster and cheaper information systems allow customers and consumers to make swift comparisons vis-a-vis the differences in services offered and in costs. In addition, the increased life expectancy brings with it the demand for new products and services. Lastly, globalisation and the increase in international trade, coupled with the formation of economic blocs, mean that financial institutions need to improve their level of competitiveness on a day-to-day basis. The response to these opportunities and risks must come from a reflective and systematic process marked by an analysis of opportunities, risks, as well as the strengths and weaknesses of the financial institution at all levels of business or activity, viz., at corporate level, business level, segment level and, finally, functional level. Together with the contribution from the analysis of the company's resources and capabilities, the integration of all these levels allows us not only to better analyse new opportunities or risks of the financial institution in any banking business, but also to identify those potentialities or capabilities that the bank or entity must implement in order to address these new challenges or opportunities. Therefore, the main thrust of our research will be to analyse, within the theoretical framework of Resources and Capabilities, the importance of intangible assets in the Strategic Management of Santander Group, and to configure the strategy within the Group at different corporate, business and segment levels. In a parallel fashion, due to the enormous importance that the corporate level is acquiring, we will look at the organisation's values, the source of competitive advantage, the growth strategy as well as the business levels that directly depend upon it. We will then investigate the main segments. Lastly, we will assess the importance of intangible assets in competitiveness and in contributing to the bottom line. To respond to these objectives we carried out a structured questionnaire with branch managers. We first explain the TRC; afterwards we give a brief explanation of the methodology used, followed by an explanation of the results and main business implications. We begin by explaining the theoretical framework. 2. Theory of Resources: Evolution and Main Concepts If we conduct an in-depth analysis of literature on business strategy, we see that in the 1980s most researchers and academics focused on the environment or the external part of the analysis of the organisation, leaving to one side the role of resources and capabilities in organisations or treating this as a supplementary issue. …