Let’s Talk about Governance
Governance is not a new topic when it comes to corporate practice and compliance. We often take it for granted, assuming that governance is imbued in any properly constituted companies, when the reality is far off. Epic corporate failures are ultimately problems of human action, which could have been prevented by better governance.
What is Governance
Corporate governance includes factors such as corporate structure, board composition (including diversity), business ethics and anti-corruption. The definition has also been evolving in its interaction with “E” and “S” factors, which now includes ESG integration into governance topics such as business ethics. The World Economic Forum Global Future Council on Transparency and Anti-Corruption has developed a basic list of factors that should be included in “G” of ESG:
Note that these are by no means exhaustive but could be a good general reference and starting point for think about various relevant governance topics.
Why Governance Should Be the First (if not already implemented)
Beyond the need to be compliant with regulations, and to some extent, to look good overall as an organization, governance is the key to long-term success and sustainability of an organization. Better governance ensures alignment of stakeholder interests, making the organization more effective as a whole, and therefore, more profitable generally speaking. At the same time, it prevents and reduces risks that could have massive negative impact on an organization and even lead to abrupt changes and in the worst case, overnight collapse of the business.
While it may look slightly daunting with the variety of subject matters it covers, governance is still a relatively easy aspect to implement in any organization as it is fundamental, largely common-sensical, and based on well-accepted management principles such as accountability, transparency, fairness etc. The next section explains some simple apporaches to improving governance standards.
How to Improve Governance Standards for Businesses
Certain governance factors are more obvious and measurable, e.g. Board composition, corporate structure and leadership. Organizations could work on improving the metrics in these areas through adopting more inclusive hiring/board selection practices.
Making policies and relevant information publicly available, organizations could also improve their transparency and engagement with the public, while making clear commitments in governance issues of anti-corruption, competitive practices, social/political responsibilities etc. However, depending on the type of organization, e.g. public v. private, the applicable and appropriate standards may vary. Political and geographical factors may also make comparisons across regions/counties less meaningful given the unique context of each location. Adopting a context-appropriate approach to setting standards is therefore an implicit assumption.
When it comes to governance factors that are more difficult to define, quantify and/or measure, e.g. business ethics, organizations should seek to dig deeper and find more specific and defined objectives that are most relevant to them. For example, if the company considers fairness as an important principle in its business ethics, then it could establish and evidence the aspects of fairness in its processes and outcomes, e.g. hiring practice, equitable outcomes/treatment of employees/suppliers/customers.
It is worth reminding ourselves that any significant improvement is a long-term progress and does not happen overnight. When it comes to shifting the needles in governance standards, patience and consistent collaborative efforts are necessary to move an organization towards its goals of betterment. Good change management, including effective communication and stakeholder alignment, could help to smoothen and perhaps expedite the process.
If you like the idea, support theGreenBunnySG by following and clapping. Thank you!
Read The Green Bunny SG’s other publications on:
LinkedIn: The Social Aspects of ESG — Where Every Organization Finds a Soul; Carbon Credits — Quality Matters; On Greenwashing: Greenwashing Behaviours to Avoid as an Organization; Why I Still Believe in Blockchain; Chat GPT is Not Your Best Friend Yet — and Here is Why; Living a Colourful Life; Carbon Taxes & Credits — An Introduction; 3 Reasons Why Every Business Should Incorporate Sustainability; Master of None — Reflections on Tips to Becoming a Successful Generalist;The Fool-Proof Guide to Setting up an ESG Framework & Policy for Businesses, Investors and Investment Managers, Part 1 of 5; Gone with the Red — Ep.1; My footprints 2022;
Medium: The Social Aspects of ESG — Every Organization Needs a Soul; Carbon Credits — Quality Matters; On Greenwashing: Greenwashing Behaviours to Avoid as an Organization; Why I Still Believe in Blockchain; Chat GPT is Not Your Best Friend Yet — and Here is Why; Living a Colourful Life; Carbon Taxes & Credits — An Introduction; 3 Reasons Why Every Business Should Incorporate Sustainability; Master of None — 3 Key Tips to Success as a Generalist; The Fool-Proof Guide to Setting up an ESG Framework & Policy for Businesses, Investors and Investment Managers, Part 1 of 5; Gone with the Red — Ep.1; My Footprints 2022; More than Just Words — embracing a greener life
