In a world filled with temptations to take shortcuts, governance is our defence. It provides us with the direction and control that maintain the standards that serve the many against the carelessness or abuses of those with power.
It feels to this observer that never in my lifetime has the need for governance been as great as it is now.
Why Do We Need Governance?
The people with privilege, authority, or just the ability to get things done, have a powerful place in our societies, nations, and organizations. While many are dedicated to serving the people who look to them for leadership and care, three human frailties are ever-present:
- Temptation to abuse their power, and gain more of what they desire
- Wish for an easy life, leading to skipping over the rules or carelessness
- Capacity to get things wrong and make mistakes, despite the best of motives
These are big challenges to institutions we set up for the stewardship of our resources and the care of our people. So we create one more set of structures to meet those challenges. And these are about governance.
What is Governance?
Governance is the creation and maintenance of desirable norms of behaviour. We do this through structures, practices, policies, rules, instructions, systems, constitutions, regulations, and laws. Direction and control
Where we Find Governance
Governance is fundamental to the accountability and longevity of our institutions. So, we find it at every tier of human society, from super-national organisations like the United Nations and the European Union to small community associations and local charities. In between are:
- Nation states
- Public authorities
- Charities and not-for-profits
- Companies and other corporate entities
- Free-standing organisations within larger enterprises – such as operating units of projects
Origin of the word ‘Governance’
An understanding of the origin of our words govern, governor, and governance will be helpful for understanding the roles of governance. They derive from the ancient Greek, kubernates (κυβερνή𝜏ης). Kubernates word means ‘steersman’ and was the captain of a Greek trireme.
What would be the roles of a captain?
The role of a kubernates would be to:
- Set destination and direction of the ship
- Steer it around obstacles, storms, and other hazards
- Supervise the crew and ensure they perform their roles with diligence
These create a powerful and accurate metaphor for the roles of governance in our modern world.
The Roles of Governance in our Institutions
I would list the roles of governance as:
- Set destination and direction
Define the goal, objectives, and strategy that will move the organisation towards its next destination
- Steer the organisation
The crucial decision-making that can affect strategic outcomes (rather than the day-to-day tactical decisions that sit with managers)
- Supervise the management
Provide oversight and ensure compliance with legislation, regulation, and policies.
Secondary Governance Roles
In addition to these three primary roles, I’d add three more, secondary roles. It is not that I’d consider them any less important. More, I’d expect them to need to consume less time and attention.
- Setting ethical standards
Defining values and policies within which the organisation, its people, and, indeed, its governance, need to work.
- Creating and maintaining the culture
Peter Drucker famously said: ‘culture eats strategy for breakfast’. Setting and steering the culture is vital to a healthy organisation.
- Ensuring transparency and accountability
Often, people think of corporate governance as being primarily about transparency and accountability. In truth, what this means is nothing more than proper behavior against all of above aspects of governance
Governance in the UK: Cadbury and Nolan
In the UK, two names are most closely associated with Governance:
- Lord Nolan was the first Chairman of the Committee for Standards in Public Life.
Under his leadership, the committee developed a code of conduct for people in public life. These standards are commonly known as the ‘Nolan Principles’.
- Sir Adrian Cadbury chaired The Committee on the Financial Aspects of Corporate Governance
Their report – the ‘Cadbury Report’ – set out recommendations that are used widely throughout the developed world, in the US, the EU and other places
The Nolan Principles
Copied from the UK Government’s website, the 1995 Nolan Principles are:
Holders of public office should act solely in terms of the public interest.
Holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships.
Holders of public office must act and take decisions impartially, fairly and on merit, using the best evidence and without discrimination or bias.
Holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this.
Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.
Holders of public office should be truthful.
Holders of public office should exhibit these principles in their own behaviour. They should actively promote and robustly support the principles and be willing to challenge poor behaviour wherever it occurs.
The Cadbury Report
The Cadbury report is technical, complex, and way beyond the scope of this article. The Institute of Chartered Accountants of England and Wales has a comprehensive set of resources including a link to the whole report. However, I would like to end this article with Sir Adrian’s own definition of what good governance is about, from his book, ‘Corporate Governance and Chairmanship: A Personal View’ (US|UK):
…holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, the organisation and society.
What is Your experience of Governance?
We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.