I continue to enjoy the various posts/ articles published in the LinkedIn environment that centre on the topic of what comprises “good governance”. Some time ago I contributed my thoughts on this important topic also – and included a Chapter on this subject in my first book that I had published in 2016. 

I think it’s worthwhile highlighting here a few salient points in respect of what constitutes “good governance” with a view to help particularly directors of SME scale businesses. Here’s a starting conversation. 

In a nutshell, I have found that a recurring line of reasoning as to why a business owner/ director cannot lift their game where thinking and acting at a governance level is concerned is simply due to their perception that the scale of their operation won’t allow them to subrogate sufficient operation level activities to appropriately skilled/ qualified/ experienced employees, for these other people to take care of what is required in this regard.

When I dig deeper into the psychology of the above thinking, I see that it boils down to reluctance on the business owner’s part to “trust” such an employee to do what is required – and do so in a way which is strictly in accordance with how the employer would perform the task and to their standard of execution.

In my view and experience, owners of particularly SME’s cannot hope to markedly improve their governance capability and prowess unless they transfer as many operational level activities to other people within their organisation who are competent/ capable to carry-out the required tasks. At the end of the day, this amounts to “trusting” and “empowering” those who you need to perform operational tasks, so that they can create the time and “head-space” opportunity for you to concentrate on governance considerations/ practices.

As mentioned in the book that I had published in 2016, here are some more practices that have been proven to help directors (regardless of the scale of operation in question) become effective governance leaders of their organisations…

Establish a ‘Board Code of Conduct‘. This important document should be signed by each director who is elected onto a Board of Directors. The most important function that this document serves is to “unite” the focus and direction of the given set of directors, to then minimise/ avoid occasions when a Board resolution is later not supported (or worse still, opposed) by one or more director who voted against the given resolution at the time the resolution was put to the vote.

The reason why it is so important that a Board demonstrates unanimous support when a Board resolution is communicated to all shareholders, is that if one or more dissenting Board member decides to communicate their disagreement with the formed resolution to one or more shareholder this could have the effect of causing shareholders to lose confidence in the unity and decision-making maturity that they feel exists among Board members – and this lack of confidence could impact their own commercial performances.

So a ‘Board Code of Conduct’ often includes a provision which specifies that when any given Board resolution is formed/ made, the Board as a whole (despite opposing votes being cast by the minority of dissenting directors at the time) undertake to support the resolution when it is communicated to the wider shareholder population. This is a superb measure to bring into play to help solidify a desirable workplace culture – and it is remarkable to see how quickly directors gain the respect and confidence of shareholders when directors demonstrate a good amount of solidarity/ unity to those who they are elected to represent.

‘Code of Conduct’ documents that I have been involved in composing to date have also typically included these provisions:

  • Scope of Board decision-making responsibility/ authority in respect of financial decisions most particularly.
  • That all governance considerations, decisions and actions will be performed in reflection of the best interests of those who directors are elected to represent.
  • That all governance decisions and actions taken will be performed in reflection of such decisions/ actions reflecting the best interests of at least the “majority” of those who directors are elected to represent. Note – it remains an impossibility in all reality for any governance body to make decisions/ act in such a way that “all” shareholders’ interests/ expectations are met in respect of “all” governance decisions/ actions that are made/ taken.  
  • Directors are required to contemplate issued discussion papers (often these are issued by the CEO/ GM) on a timely basis prior to the given meeting at which they will be required to submit their considered points of view for deliberation. This is a desirable measure in order to avoid wasting time at Board meetings while directors who didn’t peruse issued discussion papers prior to the meeting do so during the course of the meeting so as to be able to contribute value to the Board meeting.
  • All directors have equal opportunity to express/ contribute their views/ opinions/ perspectives at all Board meetings. 
  • Delegation of authority to act. Sometimes it is in the best interests of making the right governance decision on a timely basis that one or two directors become empowered by the greater Board (i.e. the Board as a whole) to be responsible for focusing on a particular project/ opportunity/ matter – and then bring their determinations/ recommendations back to the wider Board for a final decision/ course of action to be decided upon.
  • The right for the Board of Directors to canvass the views of the shareholders who they represent on a particular issue/ matter/ opportunity, to then factor-in learned shareholder perspectives in the final Board decision. This is a particularly useful/ valuable exercise in order to determine “general stakeholder sentiment”, for a Board to then know what appetite exists to steer governance considerations/ discussion in a particular direction. 

…and the list goes on. Most importantly, a Board Code of Conduct helps to streamline governance processes and expected key behaviours of directors – behaviours that when practiced should prove to lift the level of governance capability and performance of the given organisation.

Ultimately, effective governance will be borne from practices that are “inclusive” and which genuinely centre on resolving the needs – and acting in the best interests – of those people who have elected them into their governance positions. The most effective governance bodies I have ever worked alongside have been those which have managed to put self-interest to one side and resolve issues/ matters/ opportunities by ensuring that the best right decisions made/ actions taken have been those which genuinely best serve the interests of at least the majority of shareholders who they are elected to represent.

Parting words of wisdom…

Enter all governance discussions and decision-making with an open mind and willingness to entertain the perspectives of your director colleagues. It doesn’t mean that you have to necessarily agree with all that is said, but this mindset most certainly will ensure that you’re demonstrating a mature, inclusive and collaborative governance skill-set to your colleagues.

And when your “Governance Rule Book” has been created, don’t be afraid to constructively challenge the relevancy of provisions within as time goes on. This act of questioning/ constructively challenging the “governance prescription” of your organisation is a very healthy activity – and could well prevent your organisation from stagnating (or from going around in circles).

Go well.