NLCorporate Governance: 6 essential chances

Today’s changes in society demand professional governance structures. The pressures on organizations to be transparent, balanced, financially stable and socially imbedded have increased. Consumerism, internet, recent financial crises, powerful lobby groups are the drivers for profound reconfiguration of corporate governance structures.

Chances are essential in the six following areas

1. The steering philosophy
2. The shape of governance
3. Who does the governing?
4. The information provision
5. The support for governance
6. The social imbeddedness of governance

1 – What is the steering philosophy?

Organization adopt a variety of steering philosophies. The focus of the steering philosophy has been on incidents and the day to day activities of the organization. Now a more fundamental transition is to be made to direct the steering philosophy towards strategic governance aimed at results and social imbeddedness and social responsibilities.

2- How is governance shaped?

The structure of governance, division of roles, tasks, responsibilities and accountability should be well defined and written down in statutes and governing rules. A scheme for regular meetings should be set up and additional meetings with other relevant stakeholders should be organized.

3 – Who does the governing?

Governing boards consist of a number of experts. Members of the board should be selected according to lack of expertise within the board. A profile of the board as a whole as well as individual profiles for each of the board members give direction to the recruitment and selection of new board members. The board should evaluate its functioning as well as the functioning of its individual members. Team spirit and a professional governance culture should be maintained.

4 – How is the information provision structured?

Governing boards should have an agenda, looking one to two years ahead of time and taking into account the budgetary and financial cycles of the organization. Essential to the governing role is timely, relevant and adequate information. Information is used to measure performance, to monitor results, to benchmarking and to verify developments. The quality of the information provision should be excellent. Key performance indicators are used to keep track of the organization’s operations.

5 – How is governance attributing to the organization’s imbeddedness in society?

The societal imbeddedness of governance can be secured by appointing board members from various backgrounds. It is however their role and the design of the governance that determines if the governing body can contribute to the social imbeddedness of the organization.

6 – How is governance supported?

Essential to its proper functioning, governance should be supported within the organization. Not only in the areas of secretarial support but also on a policy level. An interesting tool to facilitate governance board members is a dedicated website which offers information, addresses, news, facts and a 24 hours access. Experiences in the UK have shown that governance can be greatly improved by training the governance board members. The training helps to professionalize the board in effectiveness, focus and attitudes.