GOVERNANCE: THE FUTURE IS INTEGRATED
Governance is much more than following a code. It’s the approach your business follows to make decisions.
Almost everything you do contributes to your governance environment. Your people and culture, the policies, practices, standards and regulations you follow (and the ones you say you do, but don’t), the targets you set and the way you manage them, the systems you deploy, the information you share, your relationships with customers, suppliers and other stakeholders, the way you identify and manage risk - they all shape the way decisions are made and the outcomes that follow.
As businesses grow, their need for effective governance increases. Since 2018, all companies listed on UK stock exchanges must comply with a formal corporate governance code, or explain the areas where they cannot (or choose not to) comply. From 2019, larger privately-owned businesses must also report on how they apply principles of corporate governance in their organisations and how the directors discharge their statutory duties effectively. Together with gender pay, modern slavery reporting and longer-range financial viability statements, the government’s aim is to restore trust in big business by increasing transparency in the belief that it will drive more responsible decision-making.
While the UK Corporate Governance Code and the QCA Corporate Governance Code focus on decision-making at a corporate level, operational governance - the approach to decision-making across the whole organisation - attracts rather less attention. In principle, that makes sense. The board is responsible for defining the operational governance environment and must do so effectively in order to be confident of discharging its duties. After all, only a small proportion of all the decisions made across the organisation are taken by the board and a great many of those are indelibly shaped by decisions already taken elsewhere.
But ask a director how confident they are that their end-to-end governance assures proper discharge of their duties and very few will answer immediately. Even fewer will say they feel fully assured. Those who do will almost certainly have a few questions for their colleagues when they get back to the office.
So, what’s going on? There’s never been a greater focus on corporate governance than there is right now, nor a wider variety of tools, systems and technologies to help.
It is not that expectations are unclear, nor a lack of belief in their importance, nor a scarcity of available solutions to meet them. The challenge is integration.
As the spotlight on corporate governance intensifies, the more the rest of your governance environment is cast into shadow. It’s not the intention, but it is certainly the effect. That is not to say it is left untended. Quite the contrary, it is likely that there is an executive responsible for each of the component parts, each busily deploying a smart, digital solution to enhance user experience and improve productivity. And that’s generally a good thing. Except when it causes you to lose sight of the reason you were doing it in the first place because everything has become segregated.
In many ways the future of governance is to go back to basics. Less an end in its own right, more an integral component of achieving your purpose. It requires an integration mindset and an holisitic approach. Much more than the sum of its parts, an integrated governance environment delivers the confidence, assurance and reassurance that boards, team members and stakeholders need to unlock the potential in any business.
- Rosolution, May 2020