Magazine article Management Today

The Golden Rules of Governance

Magazine article Management Today

The Golden Rules of Governance

Article excerpt

What does good corporate governance mean in an age of transparency and ethical awareness? How can it best be communicated? Our panel of executives and academics analyse an idea that is constantly evolving.

The aim of this discussion is to talk about corporate governance, which has been defined as the 'system in which corporations are directed and controlled'. Governance provides the structure through which corporations set and pursue their objectives, reflecting the context of the social, regulatory and market environment. However, it's so much more than that these days. It increasingly embodies everything to do with business, and now is a term that applies to SMEs as well. It's to do with the culture of an organisation and having a sense of doing the right thing. As an academic, Chizu, what do you think?

Chizu Nakajima I think governance has two main strands: corporate performance and financial performance. Accountability is something academia has tended to ignore in the past, because we've been totally confused by it. The mainstream research thus far has been done by those people who tended to measure only by share price going up or down. And that's a very narrow view of measuring the effectiveness of corporate governance. We've got to make sure that academia isn't excluded from discussions on this.

Carol Bagnald I'm responsible for commercial and business for HSBC in London. I've been in the industry for 37 years and seen huge changes. I agree that corporate governance has two strands: it's about how you run your business. But the strand that has become a lot stronger is the way you run your business. In organisations such as HSBC, which has 270,000 people working across 6,500 offices in 80 countries, it's not just about how you do it at the top, it's right the way through the organisation. You can only appreciate effective governance when reputation is at risk. Reputation takes years to build up and can be lost very quickly.

Pat Cleverly For a long time, I think governance became obsessed with structures and processes and tick-boxes. But it's important to remember culture and values are the things that hold your whole organisation together. It's easy to forget it's people who lead an organisation and set the tone. The reality is that organisations are living in a world that pays attention to their behaviours. You can't manage brand reputation: it's the outcome and consequence of what you're doing.

Estelle Brachlianoff For me, governance is about making sure all my 14,000 employees in the UK are proud to work for Veolia. You start with the head of the business, but then it has to reach everybody within the organisation.

Howard Kerr I've worked in a number of industries in various countries, and the first thing to point out is that corporate governance is not new. What's changed is that every business is now doing it within a goldfish bowl.

Most companies are doing the right thing every day, but it's something that needs to be done habitually as part of their business.

Kitty Owen Isn't that the huge challenge of governance: how do you effectively communicate it? Antony Jenkins drove through huge changes at Barclays that, arguably, were extremely admirable, but he is now suffering the consequences of that. Paul Polman at Unilever had to take a huge risk and persuade shareholders that quarterly reporting wasn't the best thing for the company. So the difficulty can be getting the message of corporate governance across.

Pat Cleverly We sometimes forget that business is about people and relationships. Businesses should tell their story openly, not wrap it up. That's how you communicate to younger generations, who are more demanding. Leadership teams have to be brave. It's hard putting your head above the parapet when there's a high level of cynicism in business.

Carol Bagnald What's been going on in the financial services industry is horrid, but I have never shied away from saying that I work in banking. …

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