Governance comes from a Latin word ‘gubemare ‘ meaning to steer therefore the primary function of the governing body is to provide direction not control
Governance comes from a Latin word ‘gubemare ‘ meaning to steer therefore the primary function of the governing body is to provide direction not control. By effectively implementing the principles and governance outcomes of King IV and managing its responsibilities regarding strategy, policy, oversight, and accountability, the governing body is assured of good ethical culture, good performance, effective control, and legitimacy.The governing body if it effectively leads the organization, inspires confidence to shareholders and stakeholders. It is the duty of the governing body to provide vision so that the organization discharges its mandate in line with the principles of King IV.By harnessing strength, wisdom, and intelligence the governing body provides strategic direction to realize organizational goals much like a captain of a ship who leads and provide direction to all crew on board and is even responsible for the material and the well – being of the vessel. Benefits organizations accrue are governance outcomes, while its aspirations are principles. Sound governance structures and processes must be incorporated to make informed decisions.
Discussion
The governing bodies must act in good faith and that there must be no conflict of interest.It must be competent enough to discharge its fiduciary duties. The body must be accountable, responsible and transparent in the way it discharges their duties as they provide an effective leadership platform for members both of the executive and the general workforce.
Ethics in an organization must be directed by governing body and the body must assume full responsibility, for the outcomes, as they apply to the triple context. Codes of conduct and the board charter must be readily available to all concerned parties regarding their implementation.The organization can use its information communication technology platforms such as websites or Facebook accounts to communicate their standards. Ethical standards must be incorporated in suppliers databases, also it is imperative to include them in employee induction training programs and employee hand book for refferencing.The main function of the governing is to formulate policy while the implementation role must be left to management. To effectively lead, governing bodies must have mechanisms to detect breaches and the means and capacity to rectify them
The governing body must be seen to enforce standard operating procedures, be they internally developed, industry regulations, national legislation or international best practices. Through the implementation of various codes, best practice and standards the organization must be seen to be a good corporate citizen in its internal affairs and external affairs.Governing bodies must plan for the future like any other legal person regarding its future prospects
The governing body must make it imperative to solely be concerned with oversight and strategy formulation.The core purpose, opportunities, and risks, the business model must clearly understand that they are inseparable elements of value creation.Strategy both short-term and long-term as formulated by management should be approved by governing body which is ultimately responsible for all outcomes. Policies and operational plans as developed by management must be approved by the governing body to so as to give effect to strategy.The core function of the governing body in this instance is to provide oversight effect and must take responsibility for its actions on the triple context in which it operates.The body must be alert to the general viability regarding solvency and organizational status as a going concern.
Another critical aspect of a governing body is that reports issued by the organization comply with the legal and statutory requirements and are comprehensive to enable stakeholders to make informed assessments of performance in relation to short-term and long-term prospects.Reports must be integrated also it is paramount that reporting frameworks and standards used must be up to date. The basis for reporting of financials must be the responsibility of the governing body for material disclosures in the financials, that is the accuracy, the timeliness. A case in point is the Steinhoff that the company has been reporting results full of inaccuracies, the governing body maybe did not exercise its oversight role.
The governing body is the custodian of corporate governance in the organization should exercise its leadership by formulating strategic policy. To ensure positive outcomes the governing body must record the number of meetings, the agenda and all who were present in the meeting, even the director who proposes a motion so that in future it will act as a point of reference.Non-executive members must be allowed unfretted access to reports generated by management so as to formulate informed and coherent strategic decisions.
The composition of the governing body is critical in attaining good governance so it must compromise the appropriate balance of knowledge, skills, experience, diversity, to discharge its role objectively and effectively. An appropriate mix of skills and experience in the ranks of the governing body must be available in all committees.Also to interact effectively with management at least two executives from management must sit on the governing body so as to serve as a direct link between governing body and management.Visionary leaders direct organizations by formulating a policy that speaks to gender equality, culture, board member rotation policy and retention. An appropriate policy must incorporate a sound succession plan, that is broad and inclusive, identifying, mentoring, even development of requisite personnel for future leadership positions in all critical areas of the organization.All governing body members must conduct their business dealings in a transparent manner, so that all decisions are above board that is there must be no conflicting of interest and if there is any it must be disclosed and scrutinized if it affects input from the concerned member .Where appropriate the members composing the body must disclose their qualifications, retirement plans, rotation policy and the period they have served in the organization .Also important is that the chairman of the governing body must be a non-executive director if she /he has served as the CEO of the company at least three financial years must have passed before the assumption of the chair. The duties of the chair must be clearly spelled out, also the committees she/he can sit on must be clearly outlined. A clear succession plan must be adopted for the position of chair to ensure continuity for good governance outcomes.
The delegation of roles and responsibilities through committees established by the governing bodies must promote independent judgment. Generally, the roles to be delegated must clearly spell out and for effectual leadership, committees must be adequately resourced to carry out their mandates.Procedures, terms of references must be in white and black and must be written down. Prerequisite skills for a particular committee must be availed so that it is able to holistically undertake its mandate. An audit committee, for example, must have members who are versed in auditing or financial matters.Mandates of committees sometimes crosscut so it is imperative that they complement rather than compete. The governing body must know that it can only delegate responsibility while it is ultimately responsible for accountability for good governance practice.
Evaluation of the performance of the governing body is to be descriptive, quantified and analyzed qualitatively if possible this evaluation must be carried out by an external facilitator or consultant.The governing body must make sure that this self-evaluation supports continued improvement in its performance and effectiveness as it leads the organization in the attainment of short-term and long-term goals.
It is the responsibility of the governing body to ensure that the appointment of the chief executive officer.The delegation of duties must not be wholesome but must be specific as some responsibilities and powers must retain by the governing body. The CEO is accountable to the governing body which in turn is answerable to the shareholders and stakeholders.
Governing bodies has functional areas of risk governance and as such should approve a policy that articulates and gives direction on risk, this is ongoing and should be continuously improved upon.Taking into account the disclosure of information it is imperative to disclose sensitive information that does not compromise organizational policy.Since risk is an integral part of decision-making the very nature of risk, its extent must be periodically assessed to ensure its management.A sound risk management policy must be formulated by the governing body and implemented by a manager at the operational level. This risk policy must be extensive, effective and monitored for its effectiveness on business continuity and the culture of the organization. A case of reputational risk is exemplified by the resignation of directors from the Gupta-linked company Oakbay because of the ongoing scandals.
The vision of the governing body regarding technology and information governance must be to make it is responsible for setting the direction on how it should be approached and addressed in the organization.This direction must be effective, proactively monitoring of intelligence to identify organization-wide risk including cyber attacks and adverse social media events. The governing must be ethical in regards to technology and must be compliant with the relevant statutes and laws.For the body to exercise ongoing oversight for good governance outcomes information must be leveraged, confidential and personal information must be protected. Standards and frameworks that appropriately comply with the business model must be adopted, effective technology and information policies must be delegated to management for implementation.Effective governing bodies must disclose significant changes and acquisitions of technology infrastructure in the organization.Areas of current and future focus must be disclosed to stakeholders and this roadmap must be concise and be relevant to organizational goals An international example where technological governance and ethical governance interrelate is when a passenger in an overbooked flight of United Airline flight of April 2017 was manhandled and the resultant video went viral. Furthermore, the failure of management to quickly rectify the issue tarnished the image of the company with further legal costs in the ensuing court case and subsequent out of court settlement.
For effective leadership governing bodies must be compliant with applicable laws, codes, and standards in a way that supports the organization being ethical and fulfill its obligation as a good corporate citizen. It the responsibility of the governing body to approve the policy on compliance management, in a holistic view of applicable laws and nonbinding rules and codes relate to King IV is one of those nonbinding code but is applied for international best practice. To effect good leadership all key areas compliance must be taken into in the reporting period. To maintain good faith with stakeholders, the governing body must disclose all material, regulatory fines, or sanctions imposed on the organization, individuals members or management for contraventions.All environmental inspections must be documented and any deviant behavior redressed as this may lead to serious financial, legal, ethical and sustainability issues. A recent example is the Enterprise saga where without a doubt some compliance issues were overlooked and have resulted in the company facing legal challenges coupled with sustainability issues as the organization may be faced to fold as it cannot retain trust from stakeholders.
Governing bodies must remunerate fairly, responsibly and transparently. Implementing this policy allows the organization attaining to strategic goals in the short, medium, long-term. Employees whether junior or senior executives must be remunerated fairly. Employees that are not remunerated fairly sometimes engage in dubious activities such as using company resources to their benefit or outright stealing. Some employees have been documented as having sold company secrets to competitors for personal gain the cause is that they are not remunerated fairly. A visionary leadership makes it a priority to remunerate fairly so as to motivate and retain human capital, a vital cog in attaining organizational goals.Remuneration policy must touch every facet of the organization and must be easily accessible to all stakeholders preferably by electronic means. The governing body must periodically check on remuneration policy, a case in point is when the Passenger Rail Agency of South Africa CEO raised his remuneration by 350%. An example where the body is toothless as they just rubber stamp the wishes of the shareholder, in this case, the government.
To provide effective leadership, the governing body must ensure assurance services and functions enable an effective control environment. Governing bodies must provide visionary leadership regarding combined assurance, the assurance of external reports and the internal audit.The chief audit executive must be competent so as to discharge his/her responsibilities with due diligence. The assurance function includes some non –financial matters like health issues, safety in the workplace, medical aid, life/funeral policies and even pension funds. The governing body must make sure a combined assurance model which is comprehensive is formulated and implemented to cover all significant risks and material matters.
A stakeholder inclusive approach should be adopted that balances the needs, interests, and expectations of material in the best of the organization over time. To effectively lead the organization the governing body must delegate a well-pronounced policy directive for effective stakeholder management. In the case of companies oversee that there is pro-active shareholder-inclusivity, meaning that all directors, audit partners whether internal or external are present at the Annual General Meeting and deliberations and reports emanating therefrom are made public. The governing must ensure the equal treatment of shareholders regardless of holdings. Group companies must interrelate, governing framework must not conflict. It is important to make subsidiary companies operate as independent entities, but conforming to the group governance policies. Policies and responsibilities delegated to subsidiary companies must be clear also there must be no crosscutting of responsibilities by directors.
It is recommended that governing bodies of institutional investor organizations must approve policy for responsible investing. Investment policy must articulate towards responsible investment code, principles and practices and that service providers are accountable with the formal mandate of the organization. The Steinhoff case which is tagged the biggest corporate failure in the history of the JSE, where there was a gap in the checks and balances in the management space resulted in the company dropping 90% of its share price. It failed institutional investors like the Public Investment Corporation which invests on behalf of Government Pension Fund among other entities.
Conclusion
From the foregoing, it can be concluded that governing bodies of organizations are responsible and accountable for effective visionary leadership as they are the highest decision-making body, though the in the application of principles in different sectors does not make them new principles likewise the governance outcomes can be generalized.In directing strategy, the governing body plays an important role in setting the vision, purpose and ultimately the direction of the organization.A visionary and effective governing body must if possible incorporate all sixteen plus one governance principles for good outcomes as it fulfills its primary responsibility of, development, implementation, and monitoring of policy for effective organizational leadership.This monitoring and implementation should be ongoing and relevant.
An organization with a long-term corporate plan needs to include sound stakeholder management policies in their decision-making mechanisms. Some even go to the extent of employing a corporate stakeholder relationship officer who acts as the link between the organization and the organization. Closer this tenet is the issue of technology governance and security, which not just a platform on which it does business but is also a forum for its visibility. With concepts such as e-marketing, e-commerce technology policy must be governed properly as it can also be a drawback as business operations are disrupted on these same by cybercriminals hacking into these ICT systems or accessing sensitive business information. This is a real corporate headache where benefits and the disadvantages need to be holistically weighed as risk and opportunity inter-relate. Visionary leaders need to formulate policies that lead to positive outcomes in this critical aspect where technology is continuously changing and developing.
Corporate thinking is where organizations have to develop a conscious effort to know how their products or services impact on critical aspects of society and environment.Policies must acknowledge the relation it has on the triple context. Therefore it is of utmost importance for governing bodies to critically question their policy input versus desired business outcomes, interrogating their decisions if they positively impact on governance outcomes and deliverables. Outcomes which are contrary to societal expectations damage the reputation of the organizational trust and relevance. Outcomes which are inconsistent with good corporate citizenship impact on reputation, value and to some extent the legitimacy and relevance of the organization. So it is imperative for governing bodies to incorporate applicable laws, industry regulations, standards, and codes of which King IV corporate governance principles is one to culminate in international best practice for visionary, ethical, sustainable and effectual leadership.
