It must be remembered that governance considerations play a major role in ensuring the smooth functioning and operational competence of varied organisations regardless of their scale. Consequently, SMMEs, large corporates, parastatals, state-owned entities, NGOs, and other societal establishments such as churches should do their best to reflect a commitment to robust governance. We shall consider a few facets that can be investigated and noted in this regard.
Present-day market developments, as well as a heightened awareness of economic and social issues in diverse stakeholder sectors, have augmented the need for firms and institutions to explicitly demonstrate their dedication to corporate governance and the safeguarding of stakeholder interests. Firstly, it is important for establishments to have an understanding of the overall concept of corporate governance. For simplicity and for ease of application across different organisations, corporate governance can be described as the set of systems and frameworks by which these organisations are controlled and directed.
The aspect of directing can be considered from the perspective of directorship in terms of overall guidance, influencing, motivation and superintending of actors within the organisational hierarchy (including all policies related thereto). The control aspect, on the other hand, can be considered from the perspective of ownership (e.g. shareholding for companies, stewardship for non-profits, as well as statutory custodianship for parastatals) and furthermore from the perspective of measurement, monitoring, recourse, and correction of organisational performance relating to the firm’s strategy.
Commitment to robust, high-quality governance can begin with the formulation of an organisational governance Charter, specifically outlining the roles and responsibilities of authority within the establishment. Depending on the nature of the organisation, Boards of Directors and Chief Executive Officers may agree upon the inherent stipulations, limits, and overall content of the Charter. They may want to ensure that this is guided by existing legislation such as the Companies Act, any Stock Exchange provisions, the King Corporate Governance Code and any other pertinent statutory instruments (for instance, for parastatals established by Acts of Parliament).
The Charter can further outline or include provisions on the protection of shareholder rights and how equal treatment can be ensured for fairness. The Charter must also speak to the issue of authority distribution between Shareholders, Boards of Directors and Executives. Charters are furthermore crucial in that they can present an outline of information disclosure and transparency with respect to developments within the organisation. This can then be considered, by the entity seeking to demonstrate commitment, as its fundamental document.
As with Acts of Parliament that tend to have Regulations that ‘put flesh on the bones’, the Charter can be supplemented by a Code of Ethics document or a Conditions of Service document, depending on the nature of the organisation. This may outline the conduct of those governed by the Boards and CEOs and may touch on other policy documents relating to the overall functioning of the organisation. Documents of this nature may include information on the appointment, roles and responsibilities of designated officials who will be responsible for compliance and monitoring of matters material to the sustainability of the establishment.
Another crucial document pivotal for reflection of commitment (and timely, considering that the year has just commenced) is the Annual Calendar of Events. Having set all events of import to accomplishment of the organisation’s objectives on the calendar, efficiency is enhanced, and a document will exist for purposes of Board and Executive accountability throughout the year.
Respecting always that a wide range of documents can be formulated based on those mentioned here, there are two overly key elements that organisations must strive to include in their overall corporate governance frameworks as they attempt to demonstrate their commitment. The first issue that must not be disregarded is that of disclosure. We reiterate its importance as cited under the information relating to the Charter. In annual reports, communication to stakeholders and on websites, it is advisable for firms to disclose the extent to which they are complying to set corporate governance policies and procedures.
Secondly, light must be shed on the aspect of delegation of duties and responsibilities in the form of establishment of Committees tasked with oversight of various spheres, including Audit, Information Technology, Compensation, Health, Safety and Environment, as well as Conflict. Overall, the formulation of and adherence to documentation linked with the facets outlined above can aid significantly in reflecting a commitment to corporate governance.
The views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. Contact info@governancegroup.org.
