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Opinion Governance Leadership

Unsure of your governance role? Creating an environment of Trust, Transparency & Accountability

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corporate governance

According to the OECD (Organisation for Economic Co-operation and Development) the purpose of corporate governance is to help build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies.

It provides the backbone through which the objectives of the organisation are set, and the means of attaining those objectives and monitoring performance are determined.

Definitions and jargons aside, corporate governance is now very much in the public domain and rightly so!

Dwight D. Eisenhower once said, “The supreme quality for leadership is unquestionably integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office.”

It makes sense, doesn’t it, to start building an environment of trust, transparency, and accountability with integrity? Both at the human level i.e. directors, leadership team, employees, customers, suppliers and investors; and at policies and practices level?

If this sounds simple – then why are organisations still struggling to get it right?

When the corporate world suffers from bad governance, the consequences are significant. When the corporate world suffers from bad governance, the consequences are significant!

Think of the disasters recently through the Financial Services and the Aged Care Royal Commissions! These recent events demonstrate a direct link between poor governance practices and adverse impacts for staff, customers and communities.

Certainly not a direct cause and effect relationship, however, organisations know they need to ‘lift their game’ in the governance space. And this has of course started with many organisations responding by being more open to embracing ESG (Environmental, Social and Governance).

Organisations in general are not prioritising the “G” in ESG

Like many acronyms, it is far easier to simply acknowledge how important ESG is and then leave it to a ‘wing and a prayer’ that it will be adopted or somehow implemented. So it is not surprising to see commentary suggesting that many Boards are predominantly focussed on the “E”, and this is to the detriment of both the S and the G in particular.

In fact, GlobalData’s ESG Strategy Survey 2021 shows that organisations in general are not prioritising the “G” in ESG. And Boards and CEOs know that without good governance, organisations are unlikely to adopt the requisite professional practices necessary for achieving success in the areas of E and S.

  • 59% of CEOs and C-suite executives of European companies commented in the Ernst & Young (EY) Long-Term Value and Corporate Governance Survey that the pandemic had challenged their ability to focus on long-term growth.
  • In addition, “60% said it sparked significant differences of opinion within leadership teams about how to balance short-term priorities with long-term investments”.

For EY the takeout messages were captured in the following thoughts:

“… the pandemic has reinforced the importance of a long-term approach. First, the pandemic has increased the expectations of stakeholders – including employees and the wider public – for organisations to take on a more active role in tackling major societal issues such as inequality and climate change. And second, it has made CEOs and boards question and change, the role of their organisations in terms of who they are serving, the contribution they make so society, and what constitutes value.

“Sustainable corporate governance is a key enabler to embed a long-term focus- one that is within their control to change”

The messaging is consistent. It is clear. It is persistent.

Boards and those in leadership roles, especially including CEOs, are more than ever challenged to positively respond to the increasing and expansive demand for change in governance practices.

The simple question for all directors, CEOs and senior leaders is:

“How do I ensure that my organisation will successfully adopt and maintain consistently good governance practices?

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