Mindset within ‘smart data’ & human edge

Digitization – with innovation and scalability as the pillars of competitiveness – is based on the rapid development of IT, which made ‘smart data’ possible and enables scaling with little capital in nearly no time and, which led to massively increasing global flows of data, finance, talent and trade.

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Articles overview (published & intended)

 
 
 
 
 
 

Article series

 

‘Governance Arbitrage’ – The risk of losing out in the own sphere of influence.
How ‘equity governance’ contributes to long-term value creation.

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Selected Literature (reading list)

The reading list comprises a small selection of articles referred to by the ‘equity governance’ approach.
 
 
 

Please direct literature recommendations to contact@sbeg.eu.
 
 

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Governance arbitrage – a permanent risk?

The purpose of corporate governance is synthesising a company’s abilities to identify, assess and take advantage of opportunities for profitable growth and sustainable development. Long-term shareholder value creation – compared to a vague stakeholder orientation – still seems the most suitable concept to guide corporate governance:

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Introduction to ‘equity governance’

The ‘equity governance’ approach intends to counteract shortcomings – causing ‘governance arbitrage’ – in increasingly demanding corporate governance by emphasizing active ownership, represented by the board of directors vis-à-vis management.

 

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Thinking in investment cases

Directing and controlling a company includes above all setting and attaining its objectives, i.e. aspirations and goals, and aligning or at least balancing the interests of the many stakeholders. Addressing ‘governance arbitrage’ here promotes the philosophy of understanding businesses as investment cases, which makes corporate governance more measurable:

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Shaping agenda & decision-making lines

Shareholders typically define the structural framework for a company to protect and grow their equity. The board of directors and the management have to bring the structures to life. Their collaboration benefits from a joint expectation of and from respect for the different roles, in particular when it comes to decision-making.[1]

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Role modelling the BOD function

Ensuring that functioning corporate governance is in place is a board of directors’ key task – as advocate and enforcer (George (2013)). The more ownership is dispersed, disengaged or indecisive, the more a functioning corporate governance and a cohesive board with complementary competencies of the directors matter (cf. Barton (2011)).

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The ‘market-to-equity’ algorithm

When thinking about a suitable approach for creating value, the attractiveness of a market (including adjacent growth opportunities) – ideally a ‘limitless’ market (Kutcher et al. (2014)) – with its momentum seems critical to success. It is a different but valid notion of the commonly used phrase ‘You can’t beat the market.’:

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