Why you really should seriously consider effective Corporate Governance Structures
Effective Corporate Governance is a necessity. According to the Economist Intelligence Unit, Reputation accounts for 75% of a company’s value. In the Public Sector, the same amount could be apportioned to image and accountability. This indicates the level of risk that organisations expose themselves to through inadequate corporate governance mechanisms.
There have been some notable, high profile corporate malaise in terms of reputation in recent years. In 2018, dismal corporate governance within car maker, Nissan, led to its Chairman, Carlos Ghosn, being accused of under-reporting of income and personal use of company assets. This was in part due to the Organisation’s lack of a Board compensation committee, responsible for reviewing executive pay. (The Guardian, April 2019). Spin on a few months and now Ghosn is posting £3.5 million to secure his SECOND release from jail for his misdemeanours. (The Independent, April 2019).
Closer to home, questionable governance structures within the FAI, specifically regarding the financial dealings of the then Chief Executive, John Delaney with the FAI itself, will lead to the entire board stepping down by June of this year. This was in large part due to anachronistic structures, lack of financial transparency and general poor leadership.
In Northern Ireland, it is widely acknowledged that the Public Sector is operating in a very challenging environment, one where the NI Executive hasn’t met in over 2 years and decision makers abilities to be proactive, has been severely hampered. In 2015, Authors David Duffy and Dr, William Byrne in their article analysing the Irish Financial Crisis, list “Unacceptable Corporate Governance Practices” particularly by the Anglo Irish Bank and the “important role external auditors in this context would also have to be questioned”, as one of the major factors for the disaster.
According to ICSA, the Governance Institute’s professional body, the impending Brexit deadline and ongoing negotiations have created political uncertainty and now is the time when it is important that organisations have robust governance policies in place.
All is certainly not lost. Nor is it a case of complete doom and gloom. There are a number of options available. Compliance measures and risk management guidelines such as ISO 31000 and the recently published SWIFT 3000 in Ireland https://bit.ly/2WJ1ktt, both of which focus on Governance are growing in popularity. ISO 9001 can also help as this also considers risk management. The rise of these guidelines in the past few years reflect how significant some organisations and structures are taking corporate reputation. In the case of the latter, Swift 3000, independent assessors will now carry out evidence-based evaluations of an organisation’s corporate practices. Only those who meet the highest of standards, will be awarded the code. No longer, it seems, can Board’s take for granted their positions or responsibilities, without serious consequence.
Recently, Quadra have worked throughout Ireland on risk management projects with the likes of Business Services Organisation (BSO), Regulation Quality Improvement Authority (RQIA) and the Health Information and Quality Authority (HIQA), in identifying potential Corporate risks and establishing rigorous measures to mitigate. If your Organisation’s Board would like to have a discussion on how to establish more effective governance structures, please talk to Quadra for a confidential conversation.