"When good governance goes missing, so does investor money." As a maxim to encourage good corporate governance, I think Martin Woods hits the nail on the head with this punchy line in his Compliance Week article (29 May, 2020).
Although Woods focusses on rooting out fraud and corruption, governance is not limited to compliance and ethics. In a broader meaning, governance assures that an organisation achieves its vision and strategic goals.
Cheap lawyers and compliance consultants will spin you a yarn about governance involving policies, checklists, due diligence and red tape. Although governance is rooted in the concept of laws for governing, it’s not about making laws for the sake of having laws.
Having a documented strategy (one that’s not out of date!), standard operating procedures (SOPs), policies, templates, records of important decisions, and even culture all have a place under the “governance” banner. They all conspire to ensure that every time a job is done, it’s done right.
Woods references VW’s penalties for defeating EU vehicle emissions tests as an anecdote to encourage whistle-blowing to limit financial- and reputational losses. Cutting corners or cheating a customer might be profitable in the short term, but it will probably catch up with you and cost more later. Exposing wrong-doing is important, but it’s merely a minimum threshold to tick the governance box.
Governance is about the rules for winning, winning whatever it is you’re aiming to achieve. Good governance doesn’t need bureaucracy and paperwork. It shouldn’t be a grudge purchase. Governance is your business system, the engine of your business as a wealth-creating asset.
If you want to build a business that feeds your wealth, start with governance – it starts with you.