Governance #1: In the Beginning – Understanding the What, Why and How
Updated: Dec 14, 2020
This Governance Series
This is the first in a series of articles focusing on governance and best practice implementation. The ‘G’ in ESG. As any internet search will show there are many thousands of articles on governance. While many of the themes in this article will not be new to seasoned professionals, we start this series from a position of getting back to basics and focus on governance that is appropriate and fits the needs of an organisation. All too often organisations have poor governance practices in place spanning from the non-existent to practices that dwarf business needs, diverting scarce resources and distracting focus.
What do we mean by Governance?
As a society we are governed by customs, voluntary and obligatory rules in the ways we live our everyday lives so that we can prosper and sustain within accepted norms. Aid agencies often speak of seeing natural governance at work in times of crisis or disaster. This is the immediate and often unconscious implementation of rules and systems by individuals, who may have had no prior connection, to succeed in meeting a sudden challenge. We also unconsciously instigate and adopt countless examples of natural governance as we engage with others in our everyday lives.
In this series we will be talking about Corporate Governance and all that it means for organisations. We define Corporate Governance as:
The conscious system of rules, processes and practices by which an organisation is managed and controlled in order to fulfil its purpose and meet its obligations.
To be effective across an organisation, governance needs to be adopted and implemented wholly and effectively with a high degree of oversight and control to meet evolving needs and obligations and continuously improve performance. To be optimally successful it is essential that it is ingrained in the business culture. By implementing the right governance operating framework, an organisation can maintain the necessary oversight and control.
Where do we start?
In a textbook world of governance we would start at point A and follow a series of logical steps through to Z implementing the perfect governance framework for our business. We may adopt one of the many off-the-shelf governance models or codes along the way. Job done, pat on the back, move on.
In the real world the reality is somewhat different. Like buying a dog at Christmas this is not a one off, time limited event. This is a never ending and continuous process of change and improvement for fulfilling business purpose and meeting obligations. Good governance should stretch an organisation to continually do better.
One size does not fit all. Before we rush into implementing a framework, audit and remedy an existing framework or use a well-known governance code, we need to really get under the skin of the organisation and understand the answers to 3 initial questions:
What is the organisations purpose, what is it here to do?
Why does that purpose exist and what is its future?
How does the organisation currently achieve that purpose?
Understanding the Answers
These are three straightforward questions and you would expect organisations to be able to answer the first two relatively easily, while the current scope, success and complexity of how an organisation fulfils this will be dependent on business purpose.
The reality is that, for some, these are all difficult questions to answer. This is a rare opportunity to stop, take stock and really understand if there is consensus on whether what has been held as true remains the case, that working practices remain fit for purpose or if there is a need for significant change.
Organisations can only really start to implement or remedy their governance to ensure its fit for purpose, after they understand who they are, their purpose and objectives and what they need to do to achieve them. Good governance is appropriate to size and needs, is fit for organisational purpose, uses resources appropriately and provides assurance.
In our next issue we’ll be discussing how organisational size, function and needs drive governance framework decisions and look at current and emerging governance codes.
Governex is an advisory business that helps businesses incorporate governance as well as answering the question of how they make positive contribution to the environment and social issues while meeting the real challenges of delivering on their business objectives and purpose.
We help organisations implement the right shift in focus from a purely financial commitment to include environmental, social and governance commitments (ESG). All in the context of meeting business purpose.
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