Why Does Governance Get Such a Bad Rap?

Tuesday - Governing Insights

Given the current leadership landscape post Covid, Governance within any organisation is mission critical now more than ever.?That being said what I have noticed since Covid is that the usage of the word ‘Corporate Governance’, creates great resistance.

Saddening from my perspective given that I have spent the majority of my professional career in the corporate domain and the negativity associated to the usage of the word corporate by business owners and entrepreneurs seems to be heightening.

There seems to be an automatic negative listening of the word ‘corporate’, almost like if you refer to Governance in this context it’s not relevant for us?????

This is alarming from my perspective considering the impact of not being compliant.

Let’s revisit history:

Where Did The Term Corporate Governance Come From:

“Corporate governance” first came into vogue in the 1970s in the United States. Within 25 years corporate governance had become the subject of debate worldwide by academics, regulators, executives and investors.

Who Gave The Definition Of Corporate Governance:

ISO 37000?defines good governance as a human-based system by which an organization is directed, overseen and held accountable for achieving its defined purpose in an ethical and responsible manner.

What Is The Philosophy Behind The Words Corporate Governance:

The Corporate Governance philosophy is scripted as: “As a good corporate citizen, the Company is committed to sound corporate practices based on conscience, openness, fairness, professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success.”

What Is The Origin of Corporate Governance:

The Corporate Governance philosophy is scripted as: “As a good corporate citizen, the Company is committed to sound corporate practices based on conscience, openness, fairness, professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success.”

Without labouring the issue read this fabulous article written by Grant Thorton:?Governance v Corporate Governance for clarification between the two terms:

https://cfi.co/finance/2015/04/grant-thornton-governance-vs-corporate-governance/

The base line fact, MANY relate to Corporate Governance as ‘bullshit’ (BS).?I have found in my 20 plus years of experience that it isn't governance that is BS, it is the application and misuse of governance by some leaders that is the problem - they've applied their version of governance with detrimental impact, and it has scared many people to the point where their experience of these environments have made them anti-corporate.

Don't get me wrong, I am not blaming leaders for proactively applying poor governance. I do believe that they implemented important governance measures at a point in time, however what does happen time and time again is that governance gets implemented and then not touched.?It is forgotten. Not kept up to date, not improved, not enhanced, not nurtured, not reinvigorated, not retested, not refined and not owned by anyone.

Yet everyone across the organisation has to follow it, apply it and navigate around it to get anything done. And it is slowly eating away at the culture and causing amongst other things high turnovers and a massive number of silent resignations.

How does this happen?

Well, governance, like many organisational practices requires commitment, accountability and ongoing nurturing and focus. And ideally when governance works well, there are key roles (which I generically call Stewards) managing the frameworks put in place to ensure that they are serving the organisation in the best way possible.

As soon as this stuff becomes irrelevant or out of date, it can get very frustrating for those on the receiving end as they are unable to make the decisions they need to or gain clarity on objectives and direction setting.

When governance is working at its best:

• Everyone across the organisation from the Board down know what their role is, because they are contained in key documents including charters, delegations and job descriptions that are reviewed and kept up to date annually
• Policies and procedures cover all of the key protocols for decision making in the business and are maintained and improved by Stewards that kept them relevant and useful
• Decisions are made by roles that had clear delegations of authority which are monitored for effectiveness and updated as requirements changed
• Expectations are defined including values and behaviours - so there are no surprises when outcomes aren't achieved
• Goals are defined and measured regularly
• Risks are controlled and managed, and mitigation strategies are put in place when a risk was too high and outside of tolerance levels
• Leaders are accountable and are held to account
• Compliance is an underlying part of the fabric of the organisation
• Each team member across the business understands how their role contributes to the Corporate Strategy and Business Plan and have annual performance goals that recognise their contribution
• The purpose and outcomes for meetings are predefined and time is used efficiently and effectively; and
• Feedback on what works and what doesn't is feed into improvement processes so that everyone has a say on what works and what needs to be improved.

In my experience every successful organisation regardless of its size and ownership has a rightsized form of governance that enables and informs leaders so that effective, ethical decisions can be made to move them towards defined goals.

The challenge, or as I would prefer to say, the opportunity, is to change the negativity surrounding ‘Corporate Governance’.?

Many senior leaders feel threatened for there is a huge deficit in understanding what it truly entails.?If their resistance lies in it being too expensive, cumbersome, irrelevant, etc and or they feel that the version they are adopting is enough, then Houston we have a problem, and that folks needs to be rectified with immediacy given the ramifications of not.