Recently the online magazine The New Statesman published an article on the fundamental principles of corporate governance for Boards. The principles in the article are those developed by the Institute of Chartered Accountants in England and Wales (ICAEW), and in summary form are:
Leadership
An effective board should head each company, steering the company to meet its business purpose in both the short and long term.
Capability
The board should have an appropriate mix of skills, experience and independence to enable its members to discharge their duties and responsibilities effectively.
Accountability
The board should communicate to the company’s shareholders and other stakeholders at regular intervals, a fair, balanced and understandable assessment of how the company is achieving its business purpose and meeting its other responsibilities.
Sustainability
The board should guide the business to create value and allocate it fairly and sustainably to reinvestment and distributions to stakeholders, including shareholders, directors, employees and customers.
Integrity
The board should lead the company to conduct its business in a fair and transparent manner that can withstand scrutiny by stakeholders.
As I read the article, and the accompanying report (for the article click here, and for the report, click here) I wondered how well the boards I have been responsible for through the years measured up to these best practice principles.
But then another question arose – “So what?” I got to wondering – “Is it important for our boards to even bother if we are not publically listed companies on the stock exchange? Why don’t we just settle for minimum compliance to keep the regulator off our case? It would save us a lot of time, and really it is not anyone else’s business anyway.” I recalled other similar questions and comments that I have heard in my time as a company secretary.
While this may be the approach for many, the field of corporate governance is constantly developing and most recently regulators and authorities are becoming less “check-list” focussed, and increasingly principles based. This means boards no longer fill in a form to say they comply, but rather have to demonstrate how their organisational culture includes the principles of good governance, and if not, why not. And to be frank, that is not a bad thing because these principles are generally based on values that Christian entities should be seen as the leading roles models for. Would your organisation be considered a role model of the above principles?
Take some time in the near future to consider whether someone looking at your organisation for the first time would readily see those values, and if not, what it is you may need to do to ensure they can.
The Avondale Business School can help you with your Governance and Board requirements – find out how by contacting Warrick Long at the Avondale Business School.
P: 02 4980 2168