Effective corporate governance is a passport to success. It is the Board’s responsibility to secure an ethical future for an organisation, and effective corporate governance should be the vehicle through which Boards do this.
There are some key questions to answer when considering corporate governance in your organisation:
- Do you believe corporate governance is critical to achieving your strategic business objectives?
- Is it regularly on your board agenda?
- Does your corporate governance strategy appear in your organisation’s annual report?
It is important to remember that all Boards are (or should be) in a position to challenge and should exercise that right. Therefore it is critical to equip them with the tools and the mindset to do so. This guide will go some way to aid that.
Without an effective corporate governance framework people, as part of a workforce or a Board, can be motivated to act for different reasons – sometimes without considering the ramifications. Establishing a clear, transparent and honest approach to conducting business and people management is critical to earning the respect and loyalty of stakeholders and employees alike.
Making organisations accountable to their stakeholders should be the most effective way of ensuring a sustainable and future-proofed operation. However, organisations must ask themselves whether their approach to corporate governance compliance is geared towards implementing and supporting the right behaviours on behalf of the stakeholders (including employees), or whether they have adopted a ‘because we have to’ approach.
If a Board’s role is to govern and set the strategy for success, agreeing what success looks like must therefore be the first step. Foreseeing and predicting change and shocks in the market is difficult and sometimes impossible, but a workforce is on the front line so ignoring their concerns or not giving them the mechanism for escalating their concerns is a cavalier and (arguably) dangerous attitude that can seriously impact an organisation’s ability to be resilient.
Behaviour and skills
If a Board and workforce is exhibiting the right behaviour and is equipped with the right skills, effective corporate governance and success should easily follow. Championing tone at the top is critical, and so it makes sense to begin with an organisation’s Board. It is key to structure the Board with the right diversity of talent to enable constructive challenge, ensuring the organisation tackles emerging issues and trends in the right way.
Boards, the workforce and their shared culture should all work together to have a positive impact on everyone involved in the organisation and the community. Boards need to know who and what they are influencing in order to understand the impact of their approach to effective corporate governance. By mapping stakeholder and influencer relationships, Boards can break down the type of engagement and activity that each stakeholder group needs to ensure effective governance.
How we can help
At RSM our multidisciplinary team of governance and finance experts are here to help you deliver best in class corporate governance and risk management. We can assist you to design and implement practical and proportionate governance and risk management solutions and advise you on the right corporate governance structure and specific aspects therein.