Corporate governance as custodianship of the business model
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Corporate governance as custodianship of the business model Michael Page1 • Laura F. Spira2
The Author(s) 2016. This article is published with open access at Springerlink.com
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 strategysetting 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. Keywords Corporate governance Business model Network relationship Business culture ethics and values
& Michael Page [email protected] 1
University of Portsmouth, Portsmouth, UK
2
Oxford Brookes University, Oxford, UK
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M. Page, L. F. Spira
1 Introduction Although 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. At the same time, companies are being required to describe their ‘business models’ in their annual reports and some accounting measurements are based on them. In its draft conceptual framework, the IASB (2015) believes that ‘business activities’ (its term for the business model) affect the unit of account, accounting measurement, and presentation and disclosure. The International Integrated Reporting Council (IIRC), the Enhanced Disclosure Task Force of the Financial Stability Board, the European Financial Reporting Advisory Group and other bodies all draw on the business model concept (Nielsen and Roslender 2015). Considerable effort has been expended, and continues to be, on definitional debate about what constitutes corporate governance and what business models are. The report of the Cadbury Committe
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