Governance is More Than Openness 1

In a recent blog Richard Sage (@BakedIdea) points out that governance is just a matter of openness and sharing.  If only life were so simple.  If this were the case then what of Enron?  What of the whole global financial crisis?  These people were open?  These people shared?  They had GAAP reporting duties – So what went wrong?

The simple fact of the matter is that (i) governance is more than just sharing, but (ii) less than the full apparatus of conformance which Richard sets out.

More Than Sharing

Governance is more than sharing.  It is about design and flow.  Financial institutions shared information internally and reported it externally but this made not one jot of difference to the near collapse of the global economy.  Collateralised Debt Obligations (CDOs) were so complex that it would take a long time to unpick each one.  It is essential to understand that if an organisation actively conspires to confound regulatory procedures then there is no governance structure that will catch it.

“Governance without design is somewhat akin to looking at a ball of multi-coloured string and trying to guess what the pullover will look like.”

Organisations (here I extend the net to government and not-for-profit) need to design for misuse.  Understand that cross-functional information flows require some degree of architecture.  Without the necessary degree of design in governable artefacts (e.g. cost models, delivery schedules and contracts) it is impossible to unpick them.  In fact, it is somewhat akin to looking at a ball of multi-coloured string and guessing what the pullover is going to look like.

Governance Is Less Than You Think

I believe that governance is only the set of structures necessary to give confidence to institutional shareholders  that their interests are being well looked after.  The functions are the business processes and technical systems which enforce and deliver them.  This is why corporate governance speaks only of Directors Duties and not of business process.  The how will be forever changing in our modern and dynamic world.

In the end, governance is counterintuitive to business.  Good governance is seen to reduce profits, to close off avenues of growth and to burden management with bureaucracy and nugatory process.  Yet good governance should clear the way.  It should lower the bar and reduce the hurdles.  In concert with a stringent and effective assurance process governance becomes light yet effective.  It delivers confidence without suffocating the organisation.

One comment

  1. I would like to endorse the comment and re-iterate the point Good Governance MUST pave the way, lighten it and remove the hurdles. This is not just applicable to corporate business; it is equally true of governance in political sphere.

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