Ticking the boxes isn’t enough

Parmi Natesan

Governance can be a sterile compliance exercise unless the organisation and its leaders look to live its principles, and choose substance over form.

The form or image of something can be useful or pretty, but it just isn’t the real thing. It’s important to bear this in mind when implementing governance —it’s all too easy to end up with the appearance of governance but not the reality.

One of the challenges is that governance is a complex matter, particularly in the public sector, where a multiplicity of legislation and different stakeholders all with different agendas are involved. To help public sector organisations follow best practice and maintain objectivity, the Institute of Directors in Southern Africa has created various papers and guidelines. These guidelines can, however, become counter-productive if they are simply treated as items on a list to be followed—the notorious tick-box approach.

Form versus substance

If one follows such a course, it’s relatively easy to achieve the form of good governance, rather than its substance. We have seen much the same dynamic play out in respect of empowerment, where corporates have, often with the best of intentions, followed the applicable code to the letter without integrating its spirit into the way they do business. The end result: right proportions of previously disadvantaged people on the board, on the shareholders’ roster and on the staff list… but no real empowerment.

Similarly, an organisation might follow guidelines for good governance and yet remain at risk of a governance scandal. That’s because remaining compliance focused (the tick-box approach) means the underlying values of governance – being responsibility, accountability, fairness and transparency -  do not become part of the corporate DNA. It’s easy for people to slip into thinking that if something isn’t expressly covered in the guidelines, then it must be OK. This is always the problem with rules: people spend a lot of time working out smart ways of getting round them.

What’s needed to make governance really work, and for the organisation to get the benefits that come with it, is for it to become part of the values that everybody lives by. When this happens, people will use governance principles or outcomes to guide their decision-making, rather than just complying with its rules/guidelines and nothing more.

In other words, people will act in the spirit of good governance even when nobody is looking, as my good friend Deon Rossouw at the Ethics Institute of South Africa would say.

Of course, creating a values-based governance culture isn’t something that just happens by itself or very quickly. That’s why King III emphasises the need for the board to provide effective leadership based on an ethical foundation(Principle 1.1), manage the organisation’s ethics effectively (Principle 1.3); and act as the focal point for and custodian of corporate governance (Principle 2.1).

This is also why the principles in the upcoming and much anticipated King IV are likely to focus more on outcomes and less on guidelines.

So don’t be satisfied with just the form of good governance—it won’t really reduce the governance risks over the long term and will condemn the organisation to become a “governance policeman”. Take the long-term approach and build the values of good governance into the corporate culture—you won’t regret it.



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This edition

Issue 68