Monday, August 29, 2016

“Digitizing Board- The multifaceted Aspects of Digital Ready Board” Book Introduction Chapter 6 "Governance Champion" Board

Governance is like the steer-wheel (governance is “steer” in Greece), to ensure organizations running in the right direction and head to the destination.


The purpose of the board of directors is to direct and monitor the organization. This purpose is generally known as “corporate governance.” Governance is the structure and processes of authority, responsibility, and accountability in a business or organization. The ability of boards to oversee and advise management so as to ensure the best fit between short-term profitability and long-term sustainability. While “corporate governance” can be modeled in general terms, and while certain aspects of corporate governance are heavily regulated in some jurisdictions, there is no standard model for it because the context for corporate governance includes a wide range of circumstances and capabilities which are subject to constant variability. So Boards need to develop a good sense of the appropriate scope of decisions, and what is pertinent to its role versus what is really the purview of management.

Governance disciple enables better decisions: Corporate governance is not about maximization, but about optimization. Governance is a sophisticated process that if well executed, will lead to better decisions. It will allow not only to protect the existing value but also to create new value for its shareholders. It is important to emphasize that governance is fundamentally about having a systematic approach to making decisions within the corporate entity. The boards play crucial roles in oversight of assessment - gauging conditions and choices; oversight of appropriation - matching priorities and resources; and oversight of accountability -scoring activity and net results.

Governance is a “framework” of policies and processes: It enables the Board to govern and report to shareholders and stakeholders. Governance is first followed by risk management as delegation flows from the board down to the rest of the organization. Governance is the framework, and risk management is the mechanism. The two go hand-in-hand. They really can not exist exclusive of each other. The business framework of “rules of engagement” are set out by the members of the board, stakeholders and investors that drive business strategy, business value, corporate responsibility and managed risk. Governance is all about conformance and performance. It means to conform to regulation and performing well to achieve business goals.

Don’t just see governance as constraints, but rather an opportunity: Effective governance facilitates the successful functioning of an organization while ensuring there are adequate controls in place to operate responsibly in accordance with its values but not to the extent of restricting the aspiration to achieve its vision through an ambitious mission. It helps to manage collaborative results and best practices that view the organizational objectives holistically and with the correct strategy lens or focus. Governance is indeed about how well an organization is being run and if set up right, it should effectively oversee the achievement of the vision, mission, and objectives.
Governance is like the steer-wheel (governance is “steer” in Greece), to ensure organizations running in the right direction and head to the destination. Corporate governance has a great impact on corporate performance. Good governance must create excellent performance, especially for the long-term business growth. The companies which have great performance must also have good governance structure and behavior as well. And GRC is about collaboration and harmony, not only a new organizational structure. And keep in mind about the rule #1 of governance: Prevention is superior to fixing.

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