Guidance for Practical Corporate Governance: PhICS Model

The international corporate governance best practices (CGBP) built up over the last decades present all-embracing set of recommendations covering all aspects of companies’ corporate governance practices. Based on experience of publicly traded companies, CGBP recommendations are posed, in fact, as universal goal for all companies. Most of corporate governance rating, scoring and evaluation methods presume that the more CGBP recommendations are installed in a company the higher level of corporate governance practice it has. Lack of some components prescribed by CGBP recommendations or their more simple forms as compared with elaborated recommendations are considered as shortcomings to be corrected. In our view, PhICS model of corporate governance provides more effective and reasonable basis for improving corporate governance practices of most companies (primarily non-public). PhICS model is an evolving set of CGBP recommendations whose selection for a particular company is determined by key development factors whose specific combination usually stays relevant for this for the period of 3–5 years or even longer. These key development factors are: phase (stage) of corporate life cycle (Ph); predominant forms of investments (I) company primarily relies on; level of control the company’s major owners want to have over the company, a leader style they exercise and their vision of company in their personal investment strategy (C); the company’s strategy (S). Relevant model of corporate governance practice for a particular company (PhICS model) is a specific set of CGBP recommendations whose selection is determined by the above factors. Although PhICS model looks “imperfect” as compared to the “ideal corporate governance” model, in terms of the number of recommendations and degree of their elaboration, it provides more effective framework for successful and sustainable company development for a certain period of its; life cycle. Yet, it is important for each company’s owners to timely readjust specific parameters of its PhICS model to significant changes in key development factors. It is only at a very advanced stage of its development and life cycle the company’s corporate governance model may take on many or even most of CGBP recommendations.