Business Governance Service

Business Governance

Business governance is the system of rules, practices and processes by which a firm is directed and controlled. Business governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.

Business governance is Concerned with ensuring that the business processes and policies (and their operation) deliver the business outcomes and adhere to relevant business regulation.

Business governance The operational performance of systems against contracted performance levels, the definition of operational performance levels, and the implementation of systems that ensure effective operation of systems.

Business Governance

How does it Benefit & Why Worthwhile

Case Study

This is an example of outcomes after we successfully delivering this service.

When Compania de Cemento Argos, S.A. was founded in Medellin, Colombia, 70 yearsago, its founders could scarcely have imagined that their small entrepreneurial venturewould one day become the biggest cement company in Colombia, the fifth-largest pro-?ducer in Latin America and one of the pioneers of good governance in the region.
In the beginning, the founders realized that they would need co-investors to moveahead with plans to build their first cement factory.
The City of Medellin and theAntioquia Railroad were the business’ first partners.
Two years later, the factory was oper-ating and the company began a history of fruitful creation of new plants and several sub-sidiary companies.
At the end of 2005, the old Compania de Cemento Argos was transformed into aholding company and renamed Inversiones Argos, S.A. (Inversiones Argos).
Its eightColombian cement subsidiaries were merged to form a single new operating company,Cementos Argos, S.A. (Cementos Argos).
Today, Inversiones Argos is the owner of 70% of the shares of Cementos Argos. Theremaining 30% of shares of Cementos Argos are in the hands of smaller shareholders.
Minority shareholders have no guarantee of tag-along right in case of transfer of control.Seventy-seven percent of the portfolio of Inversiones Argos is represented by itsinvestment in Cementos Argos, with the remainder largely invested in finance and insur-ance companies.
The largest and controlling shareholder of Inversiones Argos is theGrupo Empresarial Antioque?o (Colombia’s largest conglomerate), while the remaining46% of Inversiones Argos’s shares are in free float and held by assorted investors.Specifically, international investors and local pensions and severance payments adminis-tration companies hold approximately 11% of the shares of Inversiones Argos, withanother 35% of shares in the hands of smaller minority shareholders.
Both Inversiones Argos and Cementos Argos are publicly-held corporations listed onthe Bolsa de Valores de Colombia.

The companies do not rule out the possibility of issuing shares on the NYSE in the future. Shares of Inversiones Argos and Cementos Argosare included in IGBC Index of the Bolsa and perform similar to the performance of thewhole Index. Cementos Argos and its subsidiaries have more than 10,500 employees.

When Cementos Argos first decided to adopt good governance practices, it faced analmost complete lack of knowledge on the subject in the Colombian market. Yet, intaking the decision to move towards good governance practices, it was essential toconvey to the market what corporate governance meant for the company, and that theprinciples of good governance were not just a fad—they were here to stay. The company initially adopted a basic Code of Corporate Governance, which wassubsequently amended in line with international benchmarks. The revised Code,emphasizing aspects of disclosure and free flow of information, was discussed with avariety of stakeholders, from employees to the Board of Directors. Cementos Argos,following recommendations by its shareholders, the Board of Directors and other?stakeholders, challenged itself to comply with the highest corporate governance stan-dards advocated by international organizations. In 2004, the company finalized andpublished its Good Governance Code, which complies with the majority of NYSE,OECD, International Finance Corporation (World Bank Group), Brazilian Instituteof Corporate Governance (IBGC) and other local institutions’ recommendations forcompanies.

Actions Taken: The management of Cementos Argos now understands that implementing betterdisclosure practices helps generate wealth for shareholders and facilitates access toinvestors. The management is also convinced that adopting good governance prac-tices differentiates Cementos Argos from its competitors in the product and capitalmarkets.

Cementos Argos’s structure of corporate governance focuses on five main pillars:fair treatment of shareholders; strengthening the structure and performance of theBoard of Directors; developing procedures to provide accurate, complete and timelyinformation; establishing an Ethics Code for employees; and regulating relations withdifferent interest groups.Finally and notably, it was decided that both internal and external auditors shouldreview and inform the market of Cementos Argos’s compliance with its GoodGovernance Code. The company’s chief legal officer is charged with overseeing issuesrelated to corporate governance. In addition to good corporate governance practices, Cementos Argos attachesgreat importance to corporate social responsibility and value-added initiatives thatenhance the localities in which they operate. In particular, the company spent US$2.6 million during 2005 on different community programs benefiting education,charity, health, nutrition and cultural arts.

Customers Rate:

  • High performance Boards of Directors.
  • Accountable management and strong internal controls.
  • Increased shareholder engagement.
  • Better managed risk; and
  • Effectively monitored and measured performance.

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