Good corporate governance is fundamental to running a business properly.
However, there are still too many companies and organisations that don't understand what this really means in practice or how to deliver it. Corporate governance affects all going concerns in society from voluntary organisations to banks and even football clubs.
In fact, Rangers FC is a good example. For the past two years, the club has had problems with corporate governance and it remains to be seen whether this will have improved with the recent resignation of another CEO (it is advertising for a new one) and a non-executive director.
The most important point to make about good corporate governance is that it is a practical, not just a theoretical, concept. A lot of people have the impression that corporate governance is solely a boardroom activity. It isn't. It is a business activity that goes beyond the boardroom. Good corporate governance has to permeate through all aspects of a company's activity right down to the shop floor. It's not enough to talk about doing things right, you have to actually do them in the appropriate way.
There's often a false assumption that, just because people say things are going to happen, they do. Corporate governance is about making sure that any decision made in the boardroom is delivered in a practical sense. And the responsibility for this delivery falls to everyone in the business who works for the company, not just the board.
The tendency is to think that those in the boardroom see everything, whereas in fact they often don't or indeed can't. This is an important point in relation to whistle-blowing. If people see that some aspect of corporate governance is not working, they need to report it. The initial complaint should be made to a manager or someone else superior and, if appropriate, a member of the board. If no action is taken, then employees need to look for external support in the form of a professional body or industry regulator. In cases of fraud, physical violence or any other illegal activity, the police should be informed.
Historically, there is the perception that the boardroom is a fairly inactive, staid place, whereas in fact it should be exactly the opposite. Boards should be creative, innovative and dynamic; setting the pace and tone for the whole organisation, and probing what is happening. At the IoD we run various courses on corporate governance and boardroom values and behaviours for our members.
The relationship between the board and executive team is crucial, especially in terms of how the non-executive directors perceive themselves and their duties. There are also issues of perspective and diversity, not just around gender, but also age and background.
It is equally as important to remember that organisations are not just about procedures and policy papers. They are also about people, how they act and whether or not they deliver on what's promised. A key aspect of delivery is making sure everyone is trained and developed right up to boardroom level. In fact going back a few stages in the process, it is important to appoint the right people to the right jobs in all levels of the company in the first place, including the executive team and board downwards.
All boards have a tendency to try and negotiate their way out of trouble and, if an appointment doesn't work out over a period of time, there may be a parting of the ways. There is a tendency to continually change staff in the belief, in my view wrongly, that things will be fine. Education, training and development are an on-going process.
There are a lot of resources available online in terms of board functions, individual roles on boards and training and development. The IoD can also help with advice, mentoring and coaching .
l The IoD Scotland annual conference takes place today in Gleneagles
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