Poor Corporate Governance: Why it’s the pitfall you’re not prepared for.

In a recent blog post we posted on our affiliate’s website, we spoke about the importance of sound Corporate Governance – and why you, as a business, should be reviewing yours today. In this blog post, we look at the alternatives and the pitfalls associated with bad, or a complete lack of, Corporate Governance and what that means for your business.

While researching trends and insight about modern Corporate Governance, it was increasingly apparent that most businesses, and business leaders, are concerned with risks associated with bad corporate governance. That means one simple thing: You’re faced with it – and you don’t know what to do about it. And while publications debate the root of the problems that caused Volkswagen’s Emissions or Tesco’s Accounting Scandals, we look at 4 danger signs pointing directly towards poor Corporate Governance policy and how you can avoid falling into the pitfall that risks nudging your entire business over the edge.

 

Management rather than Strategy

Organisations change – and with change, comes the need to be agile. At some point in most businesses lives, they’ve needed strong management. Many still do – but that’s where you take the lead. For most, though, that need for management became overruled by the need for strategic thinking – and this is where a strong, empowered Board of Directors can be that key that unlocks opportunity. So, having said that – you need a board that focusses on your vision, your mission and what your business plans to do in the next 5-10 years. They support you in how that long-term strategy is actioned. Their focus should be on the results, not the way that they are achieved. The problem comes when things are out of balance and your board, as skilled and able as they may be, focusses on managing your business, and not on thinking ahead and planning for next stage growth.

 

Your board has conflicting agendas

In most of the working world, and yes, there are always exceptions, there are very few people who are in it for anyone else than themselves. And your Board of Directors will be no different. As much as they may make the right noise, and offer the right advice – there are many who hold their own personal, or corporate agenda – whether it’s one you subscribe to or not. But the result? Confusion. Utter, complicated, vision-distorting confusion. And when it comes to the long-term strategy of your business, this is where things become very shaky. Your board, as a team, should be on the same page when it comes to the future of your organisation and its initiatives. If your board has conflicting agendas related to the direction of your business it becomes incredibly hard for them to make decisions. As the head of your organisation, conflicting agendas mean that a lack of focus is carried down throughout the veins of your business and on towards the greater public getting involved with you.

 

“Trust, mutual respect, and a strong working relationship between the CEO and board members are hallmarks of good governance, and if there’s a revolving door, those important connections aren’t getting made.” – asae

 

Your board is incompetent

There are 2 major issues at hand here: You need a board who is capable and you need a board who is engaged. If you don’t have one, or the other, or worse, you don’t have either, then you’re in a very dangerous position. Let’s talk about BOD-BLOAT for a second (the case of having a board that may look great in principle, but deliver very little in practice and simply perch on the branch of your company structure sitting pretty). Your board of directors should be made up of a strong mixture of skills and experience, whether it’s commercial aptitude or industry-knowledge.

 

Your board is disengaged

Having the right people is one thing, but having the right people who are disengaged is probably worse. An engaged board means a team of people who are willing to take on assignments, responsibility. (Did we just hear a gasp?). Your board should be providing your organisation with ambassadorship and direction and if they’re not, then you should be investigating why not. It may be that they simply don’t understand the difference they make, or it may be that you’re no effectively communicating with them and asking for their input on critical factors – or, it may be that they’ve never had a desire to engage at all – in which case, they shouldn’t be taking up a seat which could be optimised by someone else. After all, it’s all about your business…. Isn’t it? Well, it should be.


Recognise that you need help getting your Corporate Governance back on track? Then we can help.


 

2017-12-19T11:51:02+00:00December 26th, 2017|News|Comments Off on Poor Corporate Governance: Why it’s the pitfall you’re not prepared for.