Be it the fall of the Medici family’s banking empire in the 16th century or Volkswagen’s emission issues in 2010, rogue directors, sloppy controls, and corporate implosions feature regularly in the business world. So, ensuring a strong foundation of good corporate governance built on accountability and ethical business behaviours is a prerequisite for companies aiming to achieve long-term success.
There are hundreds of case studies detailing the successes brought in by having a strong, active governance program. The first element to consider when it comes to corporate governance is the Board of Directors (BoD). Great boards make great companies!
Making key decisions on company oversight and long-term strategic vision, an independent BoD is the foundation of effective corporate governance. Aiding the BoD in making better business decisions is the internal auditing process. Auditors should be independent, having no financial interest in a company, with accounting issues handled transparently and detailed information accessible to the board at any time. Other best practices include streamlining organisational procedures, compliance with company policies, setting processes for risk identification, and good internal communications.
While keeping the above points in mind is important, where many firms falter is keeping their sole emphasis on the processes, audits, controls, and counter controls. In no way is it recommended to slack off on procedure. But the key benefit lies with the people – how they can be trained, motivated, and empowered to achieve bigger and greater things. Employees are often affected by the decisions made and how a firm is governed, but they typically do not have much say in the matter. Great corporate governance comes from creating people-centric policies but also ensuring that those people have a role in making these policies.
The advantages of involving employees in corporate governance is two-fold – employee engagement and the retention of talent. By creating a space for employees’ role in active decision-making, they are more engaged in reaching corporate goals - more motivation, increased productivity, and a penchant to go above and beyond. Secondly, by creating a work environment that values employees, they are more likely to put more into their work and stick around during hurdles and change. Having staff representation on the board, creating a space for employee councils, and making catered employee feedback mechanisms are some ways you can pave the way for employee participation in corporate decision-making.
Helping employees be efficient and make decisions beneficial for themselves and the firm requires another added initiative – upskilling. Upskilling must focus on every level from the top down, making each individual an essential contributor to a firm’s well-being. Junior-level employees must understand company processes and add value to existing operations. The process of upskilling and providing specifically curated training as a junior employee prepares them to overlay corporate governance as they climb up the ladder. Mid to senior-level employees must be well-versed with processes but also must take initiative to upskill and reskill themselves where necessary. A common requirement is familiarising themselves with the latest technology/digitization efforts, considering many executives at that level have not grown up against the backdrop of rapid technological innovations.
On the topic of digitalisation, the use of appropriate technology can greatly help lighten the load in implementing people-centric policies and driving employee participation. Utilising technology in corporate governance can help us be innovative, identify gaps, and bring to the forefront loopholes that can be misused. For example, digital tools and systems can automate many administrative tasks, reducing the workload of directors and executives and freeing up time for more strategic work. It helps enable faster and more informed decision-making by providing real-time access to data and information. Digitisation can also help in improving the efficiency of corporate governance processes using electronic voting applications and digital communication tools – streamlining decision-making and reducing the risk of conflicts and disputes.
A company’s success stems largely from effective corporate governance, where employees have a large stake in every decision made. They greatly reap the benefits of company triumphs and stand to lose a great deal in cases of non-success. Traditional controls and audits are important and have to continue to evolve. Technology will help in predicting gaps and driving efficiencies. But it would be the people who would give the upper hand to firms in regard to business development and growth.