Prioritising Substance Over Form In Governance Practices

In our last post we discussed why good governance matters. This time we look at the substance behind successful good governance. The key to success is putting the theory into practice, identifying what will add value, and what will work in practice, not just on forms, checklists and documentation.

Can we define what good governance is?

A report by the Department for International Development (DFID) in collaboration with the London School of Economics and Political Science (LSE) highlighted that “Governance is a multidimensional phenomenon and there is no convergence regarding its conceptual understanding”. 

There are many examples of good governance ‘checklists’ – the Financial Reporting Council set out a series of Principles and Provisions in its UK Corporate Governance Code that relate to Board Leadership and Company Purpose. These include:

• Division of Responsibilities

• Composition, Succession and Evaluation 

• Audit, Risk and Internal Control and 

• Remuneration within a company’s board. 

However, even this guidance is offered in a spirit of bespoke flexibility which can differ from organisation to organisation. 

According to the Corporate Governance Institute, the four fundamental principles of good governance include:

• Accountability 

• Roles and Responsibilities

• Fairness

• Transparency

It’s how you operate your governance practices that differentiate your success, and what we’ve observed in practice can be summarised as: 

Leadership

Great leadership is one of the foundational aspects of good governance. It’s the board that sets the tone for an organisation, and having ethical leadership ensures that the whole organisation can then align with corporate values, whilst engendering best practices in purpose, values and strategy.

Design

Get the design right; good governance can only happen when there is a methodology that is understood and can be actioned by the whole organisation, so it’s vital to get the design right from the outset. It’s the board’s responsibility to establish the purpose, values and strategy of an organisation and to ensure that the culture is aligned, with all resources established to meet its objectives, which will vary depending on the type and size of an organisation.

Accountability

A board must also be accountable for the decisions they have made. Allocated accountability supports good governance and is a crucial characteristic in transparency, so that everyone understands their respective responsibilities. Those ultimately responsible for decisions which impact an organisation should be easily identifiable.

Transparency

Transparency with information like this is a cornerstone of good governance, and it’s vital in ensuring that, if crises or controversies arise, change can be actioned and decisions can be made. Prioritising governance activities in such times can ensure that substance is prioritised over form and the right, ethical, outcomes are achieved.

Participation

Make sure everyone is involved, and your people are empowered

If you’re unsure whether your governance practices are as strong as they should be, we can help. If you’d like a confidential chat on any areas relating to your governance practices, contact Simon Davis today.