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Governance

Definition and overall goals

A definition is a very good placed to start.

The Corporate Governance Institute defines governance as:

… a set of rules, practices, and processes used to direct and control an organisation.

I’ll give them credit – it’s short.

But no clear image jumps to mind. Is it a book? What’s actually in the book? Are there ‘good’ rules and ‘bad’ rules? Who sets these rules? And so on.

I choose to think of governance as the ‘strategy’ part of an important responsibility.

Every organization has a number of stakeholders. And each has its own expectations. Sometimes, these different expectations may even conflict. Some expectations are about profitability. Other expectations are about complying with laws and regulations. Still others may be about ethical dealings or operating according to certain values.

The responsibility to consider these various stakeholders’ expectations falls to some group, often the Board of Directors. They also, then, need a strategy to deliver on these responsibilities. And that’s the role of governance – it’s the strategy (as documented by a structure of rules, practices and processes) to assure that the organization is doing the right things, in the right ways, to deliver on stakeholder expectations.

So here is TRM’s simpler definition:

Governance is the structure that assures that everyone in the organization is doing the right things, in the right way.

Governance exists in order to translate stakeholder expectations into outcomes.

This definition leads to two obvious questions.

What are ‘the right things’ that people should be doing?

The most fundamental goal – the one that is paramount – is to advance the mission. So the primary responsibility of governance is to create an environment where everyone is meaningfully engaged in pursuit of the mission in some important way.

But that is a strategic point of view and leaves a lot of latitude about day-to-day strategies and decisions, which brings us to the second part of the definition.

What is ‘the right way’?

This is about how employees or team members should make day-to-day decisions. When faced with choices, different people will rightfully have different ideas about what’s more important. So to build consistency, clear guidance is critical for considering (and sometimes having to decide between) :