What does good governance do for your business?

How can you trust corporations to do the right thing? Do businesses say one thing and do another? As the Edelman Trust Barometer 2021 revealed, globally only 61% of the public trust business. So, what can organisations do to show they are worthy of trust?
Governance is essential to creating and maintaining trust, but also for encouraging good decision making, maintaining regulatory compliance, attracting talent, and helping to manage risk.

A governance framework helps define key roles, responsibilities and procedures that keep an organisation from straying into ethical or legal grey areas.

This structure ensures that a business stays on course, even during times of stress and disruption.

What is governance?

ISO 37000, which provides guidance on the governance of organisations, defines governance as a ‘human-based system by which an organisation is directed, overseen and held accountable for achieving its defined purpose’. Good governance lays a foundation for fulfilling an organisation’s core purpose in an ethical, effective and responsible manner in line with stakeholder expectations.
Governance encompasses issues such as accountability, assurance, compliance management, transparency, anti-bribery, whistleblowing and, increasingly, sustainability. A governance system creates a structure to regulate relationships within a business, such as those between shareholders and management.

An example of weak governance

The interests of different stakeholders in a company are not always completely aligned. For example, directors of the outsourcing giant Carillion sought to grow the company by banking on income from large contracts. When the contracts delivered less than expected, it transpired that this contingency had not been planned for.
Bankers refused to prop up Carillion and it went into liquidation, leaving shareholders, stakeholders, employees and contractors facing loss and disruption. Weak governance was found to have played a major part in the company stretching itself to take on contracts without adequate back-up planning.

How can good governance benefit your organisation?

Governance helps to focus companies on their core purpose, linking everything back to this central driving force. This helps to establish a foundation of principles and purpose that contribute to stability. In turn, this has many benefits for the organisation.
ISO 37000 states that organisational outcomes of good governance are:

Effective performance

When the core purpose of an organisation is clear, employees can identify with that purpose and will feel more engaged and motivated to achieve its goals. A company that has data-driven decision making will also have increased flexibility and resilience, with the ability to change course and adapt to different circumstances.

Responsible stewardship

Accountability helps to ensure that resources are not wasted, while effective stakeholder oversight also helps to ensure responsible use of company assets. Governance is not only a guard against management failings, but also a way to maintain smart working practices at all times. Establishing a whistleblowing policy as part of the governance framework helps to prevent malpractice and corruption.

Ethical behaviour

Stakeholders are increasingly looking to companies to demonstrate that they are not open to accusations of harming individuals, communities or the environment. Publicity around non-sustainable activities can result in reputational damage as well as harming staff morale. A good governance system will embed principles of sustainability to help manage this risk.

Which standards can help?

Standards can help organisations to approach governance in a comprehensive, practical way, no matter what size or sector they work in.
Key governance standards include:

BS ISO 37000: 2021 - Governance of organisations
This landmark standard helps organisations achieve their purpose in an effective and responsible way, meeting social expectations over accountability, fairness and ethics. The standard is geared towards helping organisations define and achieve their purpose.

BS ISO 37002: 2021 - Whistleblowing management systems. Guidelines

This is the first international whistleblowing standard that helps enable organisations to create systems for receiving, assessing and addressing reports of wrongdoing. Having a whistleblowing system can deter employees from acting wrongfully as well as flagging up issues before they develop into significant problems.

BS 13500: 2013 - Code of practice for delivering effective governance of organisations

This code of practice sets out requirements for delivering effective governance of organisational performance, in organisations of any size and in both the private and the public sector. It is intended to be used as a checklist to ensure all the elements of a good governance system are in place.

The key principles of good governance can benefit organisations in all sectors and of all sizes. If you are looking to establish trust that your organisation is reliable, responsible and ethical, you need a sound governance framework.