“One of the greatest failures of every generation is that it fails to read the minutes of the last meeting”. I find this quote from David A. Noebel very interesting because it summarises how seemingly simple, and let’s face it…often mundane, practices are often overlooked but in the moment of truth are central to the effective leadership of all organisations.
Thinking of this, I am reminded of an old friend who would often say, “minutes from a meeting are needless until there is a dispute”. At first glance, you might be forgiven for wondering how this links to industry-wide, globally applied corporate governance frameworks, but like the minutes Corporate Governance is often seen as “needless” and its importance can be overlooked.
Ultimately whether you have a functioning, compliant governance framework or not may decide the fate of the companies, team and industries you lead. This is my attempt to tell you why, just as the minutes are important to the meeting, Corporate Governance is at the core of running a sustainable enterprise for all stakeholders.
Unless you are studying for an MBA, textbook definitions of corporate governance will often have you asleep before you get to the end. They will likely go on about things like “structures”, “frameworks” or “processes” that distribute “authority” and “influence” within a company or institution. I prefer to think about it by asking a simple question: What are the rules of running this business?
There is so much in the public domain on new directives, updated standards and best practice frameworks that it’s very easy to get lost, but at its core corporate governance is simply the rules applied to running the business for the good of all the relevant stakeholders. That guidance has another helpful side-effect, it guides how the business should set its objectives and how those objectives should be monitored. Viewing corporate governance as a playbook in this way helps demystify some of the “noise” out there and gives strategic credence to the “why”; and once you have that it all becomes a little clearer.
Beyond individual acts of compliance, onward to culture and nation-building
Having understood the strategic importance of Corporate Governance, now you need to go a little deeper to look at how to make it work. The digital natives among us will probably disagree, but for some time to come, I assert that organisations will remain people led entities. As long as they do, this means we cannot just code rules into the way we operate, we also need to set, grow and nurture appropriate cultures. An accepted way of doing things, cultures are extremely powerful forces that can help, or hinder, your governance environment. The good news is that culture is set from the top and as leaders in organisations we have a direct influence in this area.
Take the Enron & WorldCom scandal from the early 2000s: here, not only do we see the impact of breaking the accounting rules we also see the role of culture having permitted the aggressive risk-taking that caused the losses in the first place. In setting a culture, as leaders, we augment the typical formal processes of training and assessment that clearly set the governance rules with acceptable practices that bring these rules to life for everyone in the organisation. It’s here that the impact of the organizational culture can spread into other spheres of national life as these practices are often carried into other areas such as industry associations, educational institutions, homes. It really does become a way of life and if set right builds up strong, meaningful and lasting institutions.
The point about the impact of understanding and buying into the why of corporate governance, and then building on this beyond the nitty-gritty of ticking a box to a robust culture is so important to me because, like the often overlooked minutes at the end of the meeting, it’s not so much the minutes themselves but the culture of discipline and diligence that they create that has the power to move mountains. Consider then the power that a robust corporate governance framework has to shape the future for our companies, our nation and our continent.
When I think about this, I see the importance of driving the right approach, considering all the stakeholders, collaborating with regulators; because we are all in this together for our shared success and we wield a weapon of immense power if used correctly. Consider this viewpoint the next time you receive notice of yet another directive; remember that surely the opportunity presented in this way brings more excitement rather than trepidation.
Corporate governance in the digital age
Do any of you remember looking at a foldout map to navigate to an unknown destination? It was a life skill, taught at many schools not so long ago. We now have an entire generation who have never needed to do this and would not know where to start. Today, speak to your phone and it will tell you the weather, how to get to the shop, and oh, by the way, it might also place your call for you. All the time the technology behind this is learning. It’s learning to discern different accents, in multiple languages; it’s learning to understand the context; it’s learning to become indistinguishable from a human being.
The power that technology brings is a significant strategic asset, especially for banks, but can also be deployed against society as we have seen in the increasing number of cyber-attacks. Again, a robust corporate governance framework is essential to dealing with the changing landscape. Regulators the world over have directed that businesses, including banks, need to be run with a detailed understanding of the cyber-related risks, appropriate defences against those risks and continuity plans designed to ensure uninterrupted operation.
Further, for industries of key importance, such as banking, these directives often set the minimum acceptable standards safeguarding entire sections of the economy. In implementing these frameworks, we are future-proofing our enterprises and setting out on the road to wealth creation for generations to come. Just imagine we left such an important aspect of our lives to chance. I would struggle to look at myself in the mirror as a responsible leader.
The humble minute. The building block for years of future prosperity
To my fellow leaders in all walks of life; Corporate Governance is vital to us all not only as a tool to effectively run our enterprises for the good of all the stakeholders but as a way of creating a culture of doing things well. Remember that well-respected vehicle brand, VW? In 2015 the world found out that they were misleading us on the impact their product had on the environment. Sales immediately dropped, share prices halved and fines were imposed. Questions were asked, where was the governance? What were the rules of running this business?
Were they insufficient or very clearly broken? In Ghana, we have seen the impact of the cost of the banking sector clean-up on our economy. Literally, billions, that could have otherwise gone into wealth creation, have been used to unwind failed financial institutions. At the root of this problem was clearly a lack of corporate governance – by what rules were these businesses being run? So, we know what can happen when it goes wrong, the costs are steep; and hopefully, I have shown you a vision of what this can do for our future when it goes right.
In closing, I turn to the title of this short piece. Corporate governance is both the sword and the shield. The sword by which we lead the charge, inspire others and attack weak structures; and the shield that protects us from uncertainty, ill-conceived short term thinking and narrowly focused outcomes. Both are necessary as we forge forward and I encourage you all to embrace and shape the future of good Corporate Governance in Ghana and the world. Thank you.
The writer, Abena Osei-Poku, is the Managing Director of Absa Bank Ghana
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