National Corporate Governance Codes and IT Governance Transparency in Annual Reports

National Corporate Governance Codes and IT Governance Transparency in Annual Reports

Steven De Haes (University of Antwerp-Antwerp Management School, Antwerp, Belgium), Tim Huygh (Antwerp Management School, University of Antwerp, Antwerp, Belgium), Anant Joshi (Department of Organization and Strategy, Maastricht University, Maastricht, Netherlands) and Laura Caluwe (University of Antwerp, Antwerp, Belgium)
Copyright: © 2019 |Pages: 28
DOI: 10.4018/JGIM.2019100105

Abstract

IT governance is concerned with the oversight of IT assets, their contribution to business value and the mitigation of IT-related risks. Emerging research calls for more board level engagement in IT governance and identifies profound consequences for digitized organizations in case the board is not involved. Against this context, this article analyses how corporate governance codes are guiding boards to provide transparency on how they treat IT governance. The findings show that only the South African corporate governance code, King III, contains a significant amount of IT (governance)-related content. As a second objective, this article builds on these findings by providing an exploratory insight in the contemporary state of IT governance transparency in Belgian and South African companies. This way, the influence of the national corporate governance code on IT governance transparency is explored. The authors' findings show that South African firms tend to be more concerned with IT governance transparency in their annual reports than Belgian firms, given a comparable IT strategic role and ownership structure. Accordingly, the case is made for including more IT (governance)-related guidance in national corporate governance codes, as this might enable companies to be more transparent about their IT governance.
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1. Introduction

IT governance is concerned with optimizing the business value generated through IT assets, while simultaneously mitigating IT-related risks (Weill & Ross, 2004). Over time, IT governance gained momentum due to more companies becoming critically dependent on IT for their operational and strategic business activities (De Haes & Van Grembergen, 2015; Nolan & McFarlan, 2005). The potential benefits of IT governance are well-known by now. Weill & Ross (2004, p. 4) state that “…effective IT governance is the single most important predictor of the value an organization generates from IT…” Many studies have surfaced that identified mechanisms for IT governance (De Haes & Van Grembergen, 2009; Huang, Zmud, & Price, 2010; Prasad, Green, & Heales, 2012; Weill & Ross, 2004). Due to a direct link between corporate governance and IT governance (De Haes & Van Grembergen, 2015; IT Governance Institute (ITGI), 2003; Weill & Ross, 2004), many corporate governance mechanisms are translated into the IT governance domain. An important issue in corporate governance literature is transparency, or disclosure (Augustine, 2012; Millar, Eldomiaty, Choi, & Hilton, 2005; Morris, Pham, & Gray, 2011). However, the issue of IT governance transparency/disclosure, which is about providing stakeholders with information about the way the organization is governing its IT assets, has received little attention in academic research (Joshi, Bollen, & Hassink, 2013). Joshi et al. (2013) proposed a framework to assess the level of IT governance disclosure, together with a call for additional empirical research to contribute to the under-researched topic of IT governance transparency. In response, this study explores the influence of the national corporate governance code on a firm’s IT governance transparency. Therefore, a selection of national corporate governance codes is analyzed with respect to the included IT (governance)-related content. Building on these findings, the contemporary state of IT governance transparency in Belgian and South African companies are compared by means of their annual reports. Indeed, there could be potential variations in IT governance disclosure due to variations in the national corporate governance code. Differences in IT governance transparency between Belgian and South African companies can be expected, as the South African corporate governance code contains a significant amount of IT (governance)-related guidance, while the Belgian code does not. While controlling for the IT strategic role (i.e. financial services organizations) and firm ownership structure (i.e. listed companies), the investigation of the effect of the national corporate governance code on a firm’s tendency to disclose on its IT governance is an important contribution to the body of knowledge about IT governance transparency.

Following the problem statement and research objectives discussed in the previous paragraph, the following research questions are put forward:

  • RQ1: What IT (governance)-related guidelines are contained in national corporate governance codes and what differences can be observed between various corporate governance codes?

  • RQ2: To what extent does the national corporate governance code influence the level of IT governance disclosure of a firm?

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