International Benchmarking

International Benchmarking

Benchmarking is comparing one’s business processes and performance metrics to industry bests and best practices from other companies.

There are four primary types of benchmarking: internal, competitive, functional, and generic. Internal benchmarking is a comparison of a business process to a similar process inside the organization. Competitive  benchmarking is a direct competitor-to-competitor comparison of a product, service, process, or method.The generic concept is related to the overall performance of the chosen unit of MNC or business.

How Benchmarking works:

1.        Select a product, service or process to benchmark.

2.        Identify the key performance metrics.

3.        Choose companies or internal areas to benchmark.

4.        Collect data on performance and practices.

5.        Analyze the data and identify opportunities for improvement.

Benchmarking in Various parts of the World

Asia

Independent Directors are a requirement for listed companies in all Asian economies, where most require at least 1/3rd of the Board to be independent. The 2012 Singapore corporate governance code recommends a majority of Independent Directors when the chairman of the Board is not independent. Committees of Boards such as audit, remuneration and Board nomination are required in all Asian economies except Vietnam. In China, the Audit Committee is to be composed of Independent Directors only.

The USA

The Council of Institutional Investors (CII), Corporate Governance  Policies  state  that at least 2/3rd of the directors should be independent. The Nominating and Corporate Governance Committee is one of the three standing committees, along with Audit Committee and Compensation Committee, required by NYSE, to be composed entirely of Independent Directors. G20/ OECD principles encourage formulation of Nomination Committee to ensure proper compliance with established nomination procedures and to facilitate and co-ordinate the search for a balanced and qualified Board.

Formulation of various Committees

i.               Audit Committee,

ii.               Advisory Committee,

iii.               Nomination and Remuneration Committee,

Stakeholder Relationship Committee The U.S. National Association of Corporate Directors (NACD), recommends that

The Governance Committee should be responsible for ensuring that a process exists for the Board to routinely assess its own performance, the performance of its Committees as well as individual directors to conduct self- assessment.

Europe

European commission urges member  states to have sufficient number of independent non-executive or supervisory directors on Board. G20/ OECD: The latest principles encourage the prominent role of independent Board members. It states that, it is a good practice where remuneration policy and contracts for Board members and key executives is handled by a special committee of  the  Board  comprising either wholly or a majority of Independent Directors. Independent Directors Board to have specific proportion of Independent Directors Although, there is no specific law to enforce number of women directors  on  the Board, following countries have taken steps to maintain the ratio of female Board representation (source: www.cfainstitute. org): predetermined and measurable performance criteria, including criteria of a non-financial Nature. The UK Corporate Governance Code recommends evaluation of the Board of FTSE

350 companies to  be  externally  facilitated at least every three years (on a comply-or- explain basis) The European  Commission has proposed legislation that would require nonexecutive directors to be 40% women by 2020, up from 16.6% in 2013.

Japan

In early 2014, Japanese Prime Minister announced the goal of increasing the percentage of women in executive positions at Japanese companies to 30% by 2020.

The UK

UK businesses had voluntary targets first set in 2011 i.e. to have 25% women on FTSE100 (The Financial Times Stock Exchange) Boards by 2015.

Canada

At the Federal level, two bills are currently being tabled which will impose a 40% quota for female Board members of public companies and other regulated entities such as banks and insurance companies.

Brazil

A bill pending in the Brazilian Senate would impose a 40% female quota on the Boards of state owned enterprises by 2022. IBGC Code of Best Practices (Brazilian Institute of Corporate Governance) recommends:

i.               A formal evaluation process of the performance of the Board, of individual directors and of the CEO

ii.               The process to be conducted by the Chair

iii.               Participation of the outsider to make the process more effective

iv.               Evaluation system adapted to each organization

v.               Disclosure of the process of evaluation to the shareholders

French

French parliament adopted a bill that requires public companies making at least 50 million Euros in turnover and employing more than 500 workers to have 40% female Board representation by 2017.

Germany

In November 2013, Germany’s Christian Democrats and Social Democrats agreed on a gender quota on supervisory Boards where, issuers would be required to have women comprise 30% of nonexecutive directors by 2016. The planned legislation would require firms that don’t meet the 30% mark to leave those seats vacant. The latest G20/ OECD principles encourages measures such as voluntary targets, disclosure requirements,

Boardroom quotas and private initiatives that enhance gender diversity on Boards and in senior management.

Woman Director

Requirement of at least 1 woman Director on the Board for listed Companies and public companies

Globally, there is an increased realization and acceptability that good corporate governance is a means to create a business environment of trust, transparency and accountability in order to support investment, financial stability and sustainable economic growth. In the global and highly interconnected world of business and finance where money and corporate operations constantly cross borders, creating trust is something that we need to do together.