Do you feel a bit apprehensive when someone mentions corporate governance?
There are plenty of people who feel a bit uncomfortable about corporate governance, for many reasons. Some people aren’t confident that their organisation does it well. Others feel restricted by the limitations they think that good corporate governance places on growth and innovation. And some people aren’t confident that they can really define what it is.
And this last point is really at the heart of it. As a result of being quite difficult to define, corporate governance has become a bit misunderstood.
Isn’t it just about rules and legislation?
When people think about corporate governance, they often think about rules and restrictions that identify the things they shouldn’t do in business. And sometimes it does end up that way — the dark side of corporate governance can lock your organisation into places you don’t want to be. Which is why it gets a bit of a bad rap.
But we’d like to reframe that idea.
Everyone knows that an organisation is only as good as its people — from its Board, to employees, customers, members, and stakeholders. At BGS, we believe that good corporate governance nurtures and supports the people responsible for achieving your organisational goals and aspirations, allowing a business to thrive. In its broadest sense, good governance is a way of making sure that everyone knows why the organisation exists (its purpose), and how they can contribute to achieving this purpose.
In a very real way, good governance is actually about people — not rules.
A guiding framework
But let’s take a step back for a minute. How did we get from corporate governance to people?
At BGS we think of corporate governance as the framework you put in place to ensure the right people in your organisation make the right decisions at the right time. It also gives people accountability for those decisions. A well-implemented framework creates the space for innovation — whatever amount is right for your organisation. And it should be relevant at all levels, from frontline staff right up to the Board.
So, what makes up a good corporate governance framework? We’ve outlined the key elements of a comprehensive corporate governance framework in this infographic.
Each of these elements can seem complex on its own — let alone when you consider how they interact and overlap with one another. It’s no wonder that people can get overwhelmed at the prospect of implementing and maintaining good corporate governance measures.
We often hear people say, “where do I even start?”. Every day in fact. No kidding.
Keep it simple
So, let us break it down for you. Here are five essential items for you to have in place as the foundations of a good governance framework. With these things implemented, you can be confident that you have done the groundwork to meet your obligations and set your organisation up for success.
- Be well acquainted with the relevant entity-level legislation for your organisation. This might be the Corporations Act in Australia, or the Associations Incorporation Act in your state, or the Corporations (Aboriginal & Torres Strait Islander) Act if you’re an ORIC corporation
- Have a robust company constitution or rules that govern the organisation’s operation and activity
- Develop a governance charter that outlines how your organisation will put the relevant legislation and constitution into practice
- Create, implement and manage policies and procedures that are relevant and appropriate for your organisation. These will ensure you are meeting your commitments under other legislation like the Work Health and Safety Act, the Fair Work Act, and other sector specific legislation.
- Develop, implement and maintain comprehensive operations manuals if these are not covered in your policies and procedures.
Image credit: Emily Morter