Corporate Governance in a King IV world

How to create the best corporate governance environment for Applying King IV

Corporate Governance Professionals

 

A MESSAGE TO THE PROGRESSIVE CORPORATE GOVERNANCE PRACTITIONER

 

How to Best Break New Ground

People are naturally hesitant when facing change, and while that’s not a bad thing, many people are resistant to the changes and opportunities that corporate governance is creating. Mervyn King SC, founder of the King Reports,  often cites the many quantitative and qualitative benefits of sound corporate governance practices in his seminars and presentations. Although interest in governance is significant and continues to trend upwards, adoption of the principles and practices are lagging for three main reasons:

1. Lack of resources – People who understand how to get a positive return on investment by practically applying corporate governance principles for their organisation are in the minority.

2. Lack of tools – There are few easy-to-use tools for drafting corporate governance components, reviewing applications and facilitating stakeholder engagement.

3. Lack of support – Corporate governance adoption should start from the top, but many C-suite executives are not corporate governance aware themselves.

So what are the best-in-class organisations doing differently?

We asked dozens of innovative company secretarial, audit and financial leaders to share how they embraced King III as a corporate governance tool, changed their corporate governance culture and achieved results. They also shared best practices and pitfalls to avoid, as well as advice for success in today’s digital environment.

Rather than starting from scratch, you and your team can learn from these leaders succeeding with the King Report and mimic their success. While every organization adopts the approach that best suits its needs, the leading ones adopt the following behaviours:

• Lead with a focus on governance outcomes

• Demonstrate thought leadership

• Build success around digital efficiency

Read on to understand how effective corporate governance tactics translate into a competitive advantage; best practices employed by leading organisations; and ways that your organisation can transform its corporate governance approach now to drive better results.

 

SUCCESSFUL GOVERNANCE BEHAVIOURS

 

Successful Corporate Governance Behaviours

 

Lead with a Focus on Outcomes

Governance Executives are challenged daily with managing increasing complexity in their role while building a high-performance culture. Organisational growth strategies add more pressure.

Still, executives tend to structure the governance process, reporting mechanisms and policy development around reactive calls for intervention. That doesn’t necessarily align with how governance professionals must work to develop and nurture today’s more culture-centric governance requirements. This dichotomy creates tension among management and governing body members, and reputation and stakeholder trust can suffer – an urgent threat that governance executives must face head-on to be successful.

The governance executives interviewed address these challenges by:

• Building credibility and interest across their organisations by deploying consistent, high-quality messaging and focused awareness interventions 

• Identifying what is working well and where governance practices need to be proactively developed and embedded

• Collaborating with service providers, such as Candor Governance, to gain insights, shorten timelines and improve governance maturity positions

Having the right governance environment has been and always will be a critical component of enabling good governance. When you’re dealing with a Governing Body or one of its Committees, it’s even more important to ensure that the governance environment efficiently supports their requirements given limited time they have.

Governing Bodies (Boards) and their committees are on the front lines of the evolving corporate and compliance environments. King III and the revision of the Companies Act created the initial momentum against which corporate governance requirements have been strengthening across all sectors of the economy.

King IV™ now takes this further – Governing Bodies and management need to take the initiative to ensure that they have the right governance environments in place to support the growing demands.

More frequent and more meaningful communication is demanded, and predictive intelligence and analytical insights have elevated decision making to a true science. But risks also lurk in the Boardroom, and pressure to “make the target” at the expense of considering the other 5 capitals looms large at many organisations. Governing Bodies must urgently push for the creation of a suitably enabling governance environment

The payoff is two-fold: higher performance, but also better guidance, which feed continuous improvement and thus even higher performance.

Are you like these leaders, facing the urgent challenge of today’s governance environment?

 

Demonstrate Thought Leadership

King is very clear on the Governing Body’s responsibility in providing guidance to management in order to satisfy their accountability to the organisation and the organisation’s stakeholders. Regardless of your organisation type, size or industry, encouraging accountability and responsibility is no longer a “nice to have” because the traditional way of delegating authority is not coming back and indeed is risky in this digitally enabled world.

Corporate Governance FrameworkFramework – People and structures held responsible and how to ensure that the area’s governance environment is continually improved.

Strategy – The direction management should take to achieve the organisation’s vision and purpose.

Policies – The governance intent recorded as principles to be applied and communication to stakeholders of how the area will be governed in the organisation.

Registers – Records of activities and progress as this relates to the policy or governance area.

Charters – Agreements between the Governing Body and the people and committees they are holding responsible, recording their governance responsibilities.

Reports – Records of progress against the responsibilities recorded in the Charter including key focus areas, assessment results,  and changes in the environment.

Review – A “stock-take” of the governance environment on a regular basis, such as annually or every second year to ensure that the environment remains current and appropriate.

 

Your organization is unique – no doubt – but as the testimony of King IV and its Sector Supplements show, the principles of corporate governance are essentially the same. The key is to get strategic with your approach to providing a complete and enabling governance environment so that the Governing Body can be freed to apply their minds.

 

Build Success Around Digital Efficiency

Achieving efficiency across functions might seem simple when you look at technology capabilities in isolation. But IT and consulting professionals know that change management and process planning are the bigger imperatives when driving digital adoption and engagement. Fortunately, today’s governance executives can have access to real-time document management and process automation, enabling organisational leaders to raise the conversation above opinion and emotion, and focus it on shared realities.

Alignment is crucial for sustaining success. According to the leaders interviewed, less than one-third (30%) believe their governance environments are effective. This means there’s huge potential to enabling policy management to capture stakeholder attention and entrench an ethical governance culture.

Corporate Governance AppIt’s the simple fact that the most finite resource governance professionals have is time, and there are so many increasing demands on that time. Governing Bodies simply need their governance environments to be more efficient.

The key issue for governance practitioners is what do they need to do differently to more effectively run their business. The need here is focus on the key elements of the governance process:

• Are components being reviewed as often as they should?

•  Are responsibilities accurately recorded, agreed and reported on?

• Are documents accessible, usable and understood by our stakeholders?

The high risks associated with a poorly managed inefficient governance environment are just not an excuse any more. In this digital world and social media frenzy, stakeholder engagement on governance matters is simply an imperative that falls to the governance practitioner. Organisations can no longer afford to be hindered by manual, paper-based governance environments.

 

CONCLUSION

With the right tools, training and senior-level support, you can quickly move from an immature governance environment to a supportive and embedded governance culture.

First, lead with a focus on outcomes. Using GovN®, you have a clear opportunity to bring a sense of proximity and connection to your organisation’s governance ecosystem and at a low cost with low time commitment.

Second, demonstrate your thought leadership. With the GovN® Governance Framework, you have a clear opportunity to bring a sense of completeness and integration to your governance environment freeing the Governing Body and its Committees to spend their time applying their minds.

And lastly, build success around digital efficiency. Tools, such as the RubiQ corporate governance solution, can help you and your organisation to realise the benefits of digital efficiency and prove the impact of your corporate governance performance.

For more information on a range of corporate governance services solutions from Candor Governance, click here.