IT governance: Where technology and finance part

Eugene Lacey ZDNet.co.uk

Published: 31 Oct 2002 16:29 GMT

Corporate governance is much in the news these days. The bursting Wall Street bubble has left gaping holes in pension funds and shattered the public's confidence in buying shares as a way of building financial security for the future.

As one financial scandal after another is uncovered and the sight of chief executive officers being lead away in handcuffs becomes a regular item on the evening news, the Bush administration knew it had to act, and act swiftly to restore confidence in the financial markets.

The White House came up with a ten point plan, a task force to root out corporate fraud, a string of prosecutions and some tough words from the president: "We will hold corporate criminals accountable for their misdeeds, and we will deter corporate crimes by enforcing tough penalties...we're beginning a new era of corporate integrity. Corporate responsibility is essential to America. It's essential to shareholders. It is essential to investors."

The clean-up campaign requires chief executives to take a pledge that they will treat stock options as compensation and fully expense them out of company earnings.

There is some research from McKinsey and others that suggests investors have begun to place significant emphasis on corporate governance.

The technology industry has spotted an opportunity in all the publicity around corporate governance -- with an increasing amount of energy going into the concept of IT governance.

Hewlett Packard recently hosted a round-table discussion in London about corporate governance in IT. Background information handed out to participants states: "Although the link between IT and shareholder value is increasingly understood and quantifiable, investment in technology is particularly vulnerable to market sentiment. Financial pressure has seen companies adopt a more cautious approach to IT. The question for business leaders is to know where, when and how they should invest in technology. Solving this dilemma will have a crucial impact on the performance of business. This is where IT governance comes into play."

But is it where IT governance comes into play? And is corporate governance in IT really the same thing as a tougher regulatory regime to root out what President Bush describes as "corporate criminals"?