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Governing for performance: New directions in corporate governance 

January 27 2012

Good corporate governance remains firmly on the business agenda across the world. In economies such as the US and Europe, the key priority is to restore trust in business in the wake of the financial crisis. Elsewhere, such as in the fast-growing BRIC economies, corporate governance is recognised as a crucial factor in supporting sustainable economic and business development.

One issue that transcends different countries’ approaches to governance is the effectiveness of the governing board. Current thinking is that while there has been considerable attention on issues such as the structure of the board and its committees, there needs to be more emphasis on how well the board oversees strategy and risk as well as the appropriate behaviours required to fulfil this task effectively.

Corporate governance practice must not lose sight of its underlying purpose – the long-term sustainable success of the organisation. The primary role of the board is to approve, oversee and determine:

  • short and long-term strategy
  • an effective business model
  • risk appetite.

The high-performing board is one that adds value to the organisation by achieving a full package of responsible activities including:

  • ethical decision making
  • understanding the strategic environment
  • understanding the needs of employees, customers and all those in the supply chain
  • anticipating future events in an uncertain world.

The CIMA boardroom leadership model helps organisations understand the related factors that need to be combined to achieve board effectiveness. It recognises that both behavioural and structural or process issues are important and should reinforce each other.

Particular areas of focus where organisations and their boards need to focus are:

  • strategy and risk oversight
  • boardroom behaviours
  • the relationship between the board and management.

Frameworks and tools such as the CIMA Strategic Scorecard®, the board mandate and the COSO Enterprise Risk Management Framework can help organisations and their boards to address these effectively.

CGMA designation holders can play a key role in supporting good governance.

They may play different roles, for example, as non-executive directors or CFOs but whatever their perspective, they need to ensure the provision of high-quality information to support strategic decision-making and to demonstrate the professional and ethical behaviours crucial to the organisation’s long-term success.

They may have a difficult balance to strike between being an effective strategic business partner while maintaining professional independence and objectivity. By achieving this successfully, CGMA professionals can truly add value to the governance process and in turn, the effective performance of the organisation.

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1 Comment

Scott Reynolds

My business (Japanese based in Japan)  has recently spent many man-hours trying to determine the composition of the executive decision making board.  There has been considerable debate about the size of that board which ranged from 5 or 6 (partners and senior managers) to between 15 and 20 persons including managers and team leaders from all parts of the business.  I tried to explain as the only non Japanese member,  that the decision making board should be kept small and that it should call upon specialist groups to provide necessary support and information on strategic matters to support effective decision making.  A number of the execs seem to have lost strategic focus.  As pointed out in this article, good decisions require good data.  Without reliable and accurate supporting data, the decision making process becomes one of mere subjective discussion between people - this falls far short of being objective.  Ultimately huge amounts of time can be wasted.  Critical to success in decision making is as pointed out in the article - maintaining a strategic approach and thought process as well as to ensure access to useful, relevant and reliable data.

Scott Reynolds - Japan

Sep 21, 2012 6:48 AM
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