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Corporate and Family Governance

Corporate Governance

Governance and leadership are flip-sides of one coin for successful organizations. If you have leadership without governance you risk autocracy, fraud, and personal interests. If you have governance without leadership you risk, bureaucracy and indifference.

Good corporate governance helps to build an environment of trust, transparency, and accountability necessary for fostering long-term investment, financial stability, and business integrity, thereby supporting stronger growth and more inclusive societies.

LOGIC Consulting Corporate Governance practice the main objective is to provide clients with practical and applicable solutions that support them in governing the relationship between Shareholders, Board of Directors, the Executive Committee and all related stakeholder, which is ultimately foreseen to maximize shareholders’ value and safeguard business sustainability. All solutions provided tightly integrate the stipulated relevant laws and corporate governance code to ensure compliance.

LOGIC Consulting Corporate Governance services embed and integrate the core business values while designing clients’ board composition and dynamics, internal control systems, risk mitigation register, succession plans and transparency aspects in any related organizational system, process, and people.

Board Activation

The company’s professional Board is the steering wheel for the General Assembly and a key player of the governance journey. The effectiveness of the company’s Board of Directors is a mere reflection of the organization’s performance. LOGIC Consulting adopts a methodical approach to conduct the Board composition exercise, it usually follows a thorough understanding of the company’s strategy, operational dynamics, organizational culture, owners’ aspirations and the current expertise and backgrounds of the existing board members. Such elements form a solid foundation to establishing a professional board that reflects the real needs of the organization and most importantly the owners’ vision and mission. This approach ensures multiple benefits; (a) board size (number of board members) for an effective decision making process, (b) harmony of the members as a team and a collective brain power and (c) the existence of the needed expertise on the board that ensure achieving business sustainability objectives. LOGIC Consulting possesses a Board Members’ database that includes qualified candidates with cultivated Board experience, reputable in the business environment, governance savvy, strategic thinkers with strong business acumen and a broad business horizon. Said database provides the consulting team with an array of experiences that is matched with the identified board seats requirements of each organization. Worth noting that the nominations of the Independent Directors needed on Boards, along with a restricted number of shareholders and non-executives is made unbiasedly and professionally during the composition and nominations exercise.

An integral part of the Board composition is the establishment of the required board committees, whose members are assigned from the approved nominated Board Members. It is usually preferred that committee nominees are from the Independent Directors to avoid any conflict of interest. The number of committees that need to be established depends on the organization’s needs and maturity. Committees conduct preliminary studies and discussions for specialized matters, depending on each committee’s scope: Financial and Operational compliance through the “Audit Committee”, Risk Mitigation management through the “Risk Committee”, Board, CEO and C-1 succession, remuneration in the “Nomination & Remuneration Committee” and Governance compliance in the “Governance Committee”.

Staying up-to-date with the changes in governance practices illustrated in the governance codes, LOGIC Consulting ensures updating the Board and Committee charters to comply with the most recent updates. Based on the Board and Committee composition for each organization, LOGIC Consulting ensures that the Board & Committee Charters incorporate each organization’s board and committee specifics outlining scope, roles, responsibilities, dynamics, authorities, and rights of Board and Committee Members.

Corporate Governance calls for synergizing relationships between the organization’s management, the Board, shareholders, and all other internal and external stakeholders. The Authority Matrix is a document that lists all critical decisions made by Governance Stakeholders including General Assembly, Extra-Ordinary General Assembly, the Board, Chairman, CEO, and the External or Internal Auditors, clearly illustrating all critical decisions’ primary, secondary and final approval owner(s). Said decisions include but are not limited to Investments, budgets, company purpose, change in the company’s bylaws, Asset management, board members’ election & termination, key financial decisions, and more. This document also ensures the avoidance of any conflict of interest or the overlapping of responsibilities as mandated and stipulated by Corporate Laws or Governance Codes and protects stakeholders from any legal or financial liability.

paragraph: Building upon the firm belief that organizations need to adopt a continuously progressive mindset, the Board of Directors is required to consistently maximize its performance to improve the company’s performance and ultimately achieve the shareholders’ interests. LOGIC Consulting designed a tool that enables the board to run an annual evaluation on the board dynamics covering 12 critical pillars of effective board practices as per the Code of Corporate Governance. The tool is applied by conducting 1-2-1 interviews with each Board Member separately, to obtain their independent evaluation on each aspect. The results are then consolidated, analyzed and interpreted to generate an action plan for improvement. The Chairman of the Board is the custodian of this process to ensure the implementation of the improvement actions. Its generally advised that such evaluations are conducted by a third party to ensure objectivity of the evaluation and the generated action plan.

To ensure that the board receives periodical reports to support board members in their decision-making process, LOGIC designed The Board Reporting Kit to include a set of reports that balances the information being addressed at a board level, and avoid the common practice of Boards discussing mostly financial matters. That said, the Reporting kit comprises the following reports: (1) Strategy Progress, (2) Key Financials (income statement, balance sheet, and cash flow), (3) Internal Audit, (4) Risk Register, (5) Board Allowances & CEO and C-1 remunerations, (6) Succession Planning and (7) Corporate Governance Compliance.
Worth noting that LOGIC Consulting orients all reports’ owners on the functionality of the report and the frequency of issuance.

Control Environment

Organizations’ Control Environment is a vital pillar of governance and business sustainability. The Control Environment should be designed efficiently to avoid any conflict of interest amongst stakeholders and to protect the company and the shareholders from possible leaks, fraudulent acts, or breach of policies, procedures, laws, or codes. LOGIC Consulting team revises and designs the Control and Audit structure and functions required for the organization which are:

  • The Internal Audit department structure, reporting line and independence.
  • The Audit Committee composition and independence.
  • The qualification required for the incumbents of the Audit related jobs.
  • The relation of the company’s audit functions (Internal Audit on an operational level & the Audit Committee on a board level) with the External Auditor.

LOGIC Consulting team orients and delivers an Internal Audit register and report to the appointed Internal Audit Manager, ensuring a full knowledge transfer on its functionality, types of analysis generated, the importance of data interpretation and frequency of issuance.

Another vital pillar of governance and sustainability is Risk Management. Risk Management was initially thought to be more important for Financial Institutions, but with the increased awareness on how risk mitigation supports business continuity and sustainability, many industries started building their capabilities in this area. LOGIC Consulting devised a risk register that covers the different risk clusters, financial, market, people, operational, and more. The register embeds a risk calculator which generates statistical analysis that are finally migrated to a Risk Map. LOGIC Consulting team works with the nominated Risk Officer to build their level of awareness and understanding of the topic and by adopting a capacity building approach, a pilot department is run with the subject individual to identify the current department risks, their mitigation plans, owners, success factor and reviewing time. Worth noting that the Risk function, like the Internal Audit function, has a corresponding committee on a board level, that receives its periodical reports and the interpretations generated from the risk register for the committee discussions and board approval.

ExCom and Succession

The Executive Committee (ExCom) is the forum where the Board approved strategic directions are translated into business strategies, implemented, monitored and executed. The board ideal ExCom operates using tools and techniques that allows it to reach the highest strategy monitoring and implementation efficiency. An ExCom is considered effective, is when discussions do not take a vertical direction, i.e. each ExCom member discusses operational matters related to their own discipline, but rather when ExCom discussions are more horizontal and address the achievement of the company strategy as one team. That said, ExCom discussions and agenda targets cross functional topics such as; strategic initiatives progress and challenges, control environment improvement plans, risk mitigation plans, organization culture related issues to maintain a healthy and productive working environment, C-2 succession plans and others. To overcome the long-standing challenge of almost all organizations, LOGIC Consulting adopts a methodical approach to form executive committees and identify the right profiles for the jobs, and that is usually done through discussions with the CEO.

Building upon LOGIC Consulting capacity building approach, we ensure that the ExCom members are aligned with their roles and their responsibilities towards the Board of Directors.
This is done customizing the ExCom Charter and presenting it to ExCom members illustrating; scope, roles, responsibilities, authorities, and critical topics that are discussed in ExCom meetings. ExCom members are also enrolled into the ECM (Executive Committee Members) Program for a duration of 5 days covering the following modules: Forming Executive Committee, Effective Meetings, Aligning & Cascading the Business Strategy, Driving Organization Performance through KPIs, Establishing PMO & SMO, Identifying & Mitigating Risks, Organization Culture, Corporate Performance & Dash Boards and Risk Management.

Succession is a vital aspect to ensure business sustainability. Succession also assures investors and strategic partners of the sustainability they are promised, even with the absence of the owner or the leader in charge.
Succession is a topic that is highly advocated, discussed, and monitored on the board level.
Succession planning is usually dependent on the maturity of the HR systems of the company and its talent strategies, with which succession plans need to be tightly integrated. LOGIC Consulting sets the succession guidelines to the HR managers of organizations, which serves as a step-by-step guide during the succession journey, ensuring that all steps, tasks, stakeholders, incurred costs, reports, and other factors are well considered during the succession planning process by all stakeholders.

Transparency

Code of Conduct

The code of business conduct in our management consulting services is designed to set certain standards of conduct for all stakeholders in an organization including owners, employees, suppliers, clients, board members, and service providers on behalf of the company. The Code of Conduct specifies the business principles by establishing certain non-negotiable standards of behavior in key areas amongst all stakeholders. Companies need to have clear guidance and rules on their identified set of values when dealing with matters that may be understood or defined differently by different people as transparency, conflict of interest, hiring relatives, accepting gifts, dress code, protecting the work environment and other elements of the organization. LOGIC Consulting offers a Workshop to ensure the Organization code of conduct is aligned with its values and principles.

Management Consulting for Family Businesses

Contrary to the widespread common belief that modern corporations are being widely run by external professional managers, many of the world’s organizations continue to be controlled by families and many of which are successful and sustainable to our contemporary days.

Family businesses have historically grown with extensive time, effort, and investments from their owners, which heightens their sense of ownership of their business and responsibility towards their family business. This responsibility created a need for a formal approach to govern the relation between the family and the business and to ensure, not only the business sustainability but also the preservation of the family bond and legacy across generations.

In commitment to our mission, LOGIC Consulting extended its Governance services to address not only “Family Businesses”, but also the “Families” that manage these “businesses” and provide them with practical services and solutions that help them capitalize on the Family strengths that are foreseen to impact the Business positively, and minimize the family’s mistakes that may impact the business negatively.

A “Family Constitution” is the main module in LOGIC Family Governance services and is defined as The statement of principles that outlines the family commitment to preserve the family business legacy, regardless of being an executive in the business or not. The “Family Constitution” is also known as the “Strategy to Avoid Disputes”, as it provides the guidelines on how to better infuse the values of the family into their business operations, and how family members are required to interact together in the business context, and amongst each other as shareholders in the business.

A “Family Constitution” is most likely to be adopted at the time of generational change, when the business is about to be passed on from the founder to the second or third generation.

Through a methodical structured workshop facilitated by the LOGIC Senior team and attended by all adult members of a Family, the Constitution chapters are designed to match the family needs, size, culture, business and family aspirations. The following are the chapters customized during the workshops:

  • Family Strategy Foundation

    • Family Mission, Vision and Values. Worth noting that these are different from ones that are generated for the business

Family Policies

Exit policy and Dividends distribution Policy answers the question of what percent should family members deduct from their distributed dividends to be compiled in an Exit Fund to be used in the cases when family members wish to exit and the other family members cannot afford buying his shares, hence protecting the family from being forced to part their equity with an outsider.

Recruitment Policy answers the question of whether family members should work in the family business or they are free to pursue different aspirations. And if they wish to join the family business, do they join immediately after graduation or should they work outside of the family business for a few years?

Education Policy answers the question of what percent should family members deduct from their distributed dividends to be compiled in an Education Fund and eventually invested in the education of the young generations of the family.

Charity Policy: answers the question of what percent should family members deduct from their distributed dividends to be compiled in a Charity Fund and channeled to charity initiatives in the name of the whole family.

Conflict of Interest Policy. Answers the question of whether a Family member is allowed to be active either in the capacity of “an employee, or in the capacity of an investor, or to establish his own business” in activities related, directly or indirectly to the family business. And if so, what are the rules and principles to doing so.

Family Succession Planning Policy: Answers the question of whether the founder / CEO successor will be a family member or a non-family member, and if a family member, then what is the criteria for choosing the family CEO successor, and what are the grooming and development strategies for family members to grow in the organization.

  • Family Institutions Structure & Composition:

    Family Institutions are a key success factor for the implementation of the Family Constitution as they serve as the formal platform where all Family Members come together to discuss matters that address both; business and family matters. Family Institutions are divided into two types: Family Assembly and Family Council. The latter is only established when the family members exceed 25 members.

    During the Family Constitution workshops, LOGIC Consulting designs the structure and composition of the family forums depending on the size of the family and their overall mindset and culture, hence the following decisions are made;

    • Family members’ selection criteria for attending the Family Assembly and Family Council meetings.
    • Family Institutions’ topics and activities.
    • Family Institutions logistics (meetings frequency, meetings minutes, activities follow up etc).
    • Family Members criteria for growing into Board Members.
    • Family Patriarch detailed profile (characteristics and competencies) for succession purposes.

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