Good Governance is 'The' Key
2 October 2020, 11:30:00
Good governance is not an outcome of itself, it is forged deep inside organisations and has an almost primitive connection with culture. My latest article in the Guernsey Chamber magazine, Contact.
Increasing regulation, global crises, rising compliance salaries and yet continued corporate failures. You only have to take a look in the media and see the catalogue of Wirecard, Airbus, VW and many others.
An increasing emphasis on ethics, customer centricity, operational efficacy, digital usability and yet we still have to ensure shareholder return.
Governance has become a buzzword over the last few years, and even more so during the current global pandemic, as organisations wrestle with how to engage with employees, meet strategic aims and ensure continued productivity and sustainability.
Corporate Governance, which is synonymous with listed entities and is bound up in codes and regulation is often seen as yet more obligations, placing a strangle-hold on innovation and agility and seen by CFOs as just another cost!
This is most people’s view of governance.
I’m here, working to change that.
According to Professor Catherine Staite,
Governance “…is developed, achieved and maintained by the continual application of effort, self-awareness, and mutual trust.
It cannot be imposed by the introduction of standards, rules or protocols.
Rather, it is continually co-produced by members of the organisation, in all their diverse roles, by the way in which they learn how to blend rules, processes and controls with strong values and positive behaviours…”
It’s simply no longer enough, to depend upon policies, procedures and controls.
Decision-making and the implementation of those decisions, interfaces, almost continually, with our personal values, with our experiences, and with our beliefs.
Governance is a way of life within our organisations.
Surely, therefore, if there is any value in striving towards “good governance”, then we should work much harder to make this important concept accessible, understandable and achievable.
Governance involves many broad themes and some people have attributed principles or indicators, however there is a lacking practicality and humanism in this approach.
What if, there was an operational framework, a practical map that clearly shows, not what it is, or how it can be defined, but how it can be achieved. The things we need to do to get it!
The model of governance I’ve created over decades of experience and research allows for this need for practicality and additionally provides the ability to assess and quantify each element (using a Governance Perception Indicia ©). These data outcomes can be used to implement and drive governance improvements.
The foundation of the model is organisational culture, which integrates with both decision-making and implementation efficacy. These each have three periphery elements, meaning that under this model there are nine pragmatic areas that an organisation can measure and then focus on to improve their overall governance.
Why would you even want to do that? Well, the literature is clear, good governance improves organisational performance and supports increases in compliance outcomes.
Work carried out by Gompers and Bebchuk have clearly demonstrated that good governance results in better ‘contemporaneous and subsequent operating performance’.
More recently, in 2020, results of a study by Kaouthar highlight the importance of governance design in ‘supporting investments and deploying human resources and capabilities within organisations’. These all support the theoretical work of Aguilera and Becker who are ‘gods’ in the governance field.
Good governance pushes organisational performance upwards.
The most beautiful thing about governance, though, is that not only do you get improved financial performance, enhanced sustainability and a positive organisational culture, you get compliance.
Good governance produces an outcome of compliance.