Abstract
Recently businesses have been encouraged to discuss their business models in their annual reports as a means of communicating their future intentions to readers of their financial statements. At the same time, corporate governance has continued to be a focus of attention. In this paper we set out the view that a useful way of regarding corporate governance is that of custodianship of the business model—by which we mean that the directors are responsible for sustaining and developing a company’s business model. A comparison of corporate governance and the activities required to sustain and develop the business model shows them to be essentially the same. A business model view has the advantage that it unifies the compliance and monitoring aspects of governance with the advisory and strategy-setting roles of directors, roles that have sometimes been seen as conflicting. Viewing corporate governance from a business model perspective highlights aspects of board responsibilities that are not explicitly recognised in the UK Corporate Governance Code and may have been neglected in the prevailing emphasis on compliance, but which are intimately connected to both network relationships and corporate culture which are now becoming a source of concern.
Highlights
The last two decades have seen an increasing concern about issues of corporate governance and the introduction of extensive codes and guidance to address these issues, debate continues about the role and effectiveness of the board of directors
In this paper we set out the view that a useful way of regarding corporate governance is that of custodianship of the business model—by which we mean that the directors are responsible for sustaining and developing a company’s business model
Viewing corporate governance from a business model perspective highlights aspects of board responsibilities that are not explicitly recognised in the UK Corporate Governance Code and may have been neglected in the prevailing emphasis on compliance, but which are intimately connected to both network relationships and corporate culture which are becoming a source of concern
Summary
The last two decades have seen an increasing concern about issues of corporate governance and the introduction of extensive codes and guidance to address these issues, debate continues about the role and effectiveness of the board of directors. Scandals, such as Volkswagen’s cheating on emissions testing and Libor rigging at Barclays and other banks, have raised questions of directors’ responsibility for operational matters and ethical behaviour that seem peripheral to corporate governance as it commonly characterised. The model can be represented in different ways such as a diagram, a spreadsheet, a set of equations or a narrative Such representations are by their nature incomplete and focus on particular aspects of the business’s activities and relationships. This comparison shows that they are essentially the same and supports the argument that viewing corporate governance through a business model lens provides a new and helpful approach to discussing board responsibilities
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