Can governance be marked out of 10?

Unfortunately the decision that governance is bad only seems to occur after a scandal, but good governance should prevent scandals from occurring in the first place.  Do you think good governance can or should be measured periodically, as part of an organisational health check? What are the right metrics? What are the advantages and disadvantages of publishing the results? 

  • Anonymous
    Anonymous 10 months ago
    The Select Committee said that rigorous transparent rating exercises should become an integral part of the business landscape. Scoring the FTSE 350 as red, amber or green may make corporate governance easier to understand and reduce the perception that the governance rules can only ever be fully understood by specialists. On the other hand, simplistic traffic light scores which relate to overall performance could mask real problems in specific areas, and therefore pose risks for those who decide the score (FRC) and those who rely on it (investors). Can governance and culture be reflected in any 'at a glance' approach, or are somethings just too difficult to measure?
  • Although the idea is attractive in its simplicity it is seeks to simplify something that doesn't lend itself well to that. Another potential shortcoming is the danger that a mark about the quality of governance is taken by the reader as being a guarantee of future viability when nothing can guarantee that. Perhaps more useful it would be some sort of assessment even if internal about whether the standard of governance that the company or other organisation wants is the standard of governance that it has. This could be something that organisations could then disclose or report upon.
  • The current focus on Corporate Governance is welcome and does provide the opportunity to revisit the purpose of corporate governance - arguably, it should be focussed on supporting good business practices, rather than preventing corporate failure. The FRC has recently announced a fundamental review of the Corporate Governance Code, one outcome of which could be stripping the Code back to its principles. This would enable corporates to apply the principles in a way that suits them - and in doing so, encourage boards to consider and discuss what is actually right for them. This in itself ensures governance is being focussed on at board level and would also encourage a move away from the current "tick box" approach, around reporting in particular. The downside of this approach is that it will make make governance harder to measure or compare across corporates, but if that is the cost of true substance over form, perhaps that's no bad thing.
  • The current focus on Corporate Governance is welcome and does provide the opportunity to revisit the purpose of corporate governance - arguably, it should be focussed on supporting good business practices, rather than preventing corporate failure. The FRC has recently announced a fundamental review of the Corporate Governance Code, one outcome of which could be stripping the Code back to its principles. This would enable corporates to apply the principles in a way that suits them - and in doing so, encourage boards to consider and discuss what is actually right for them. This in itself ensures governance is being focussed on at board level and would also encourage a move away from the current "tick box" approach, around reporting in particular. The downside of this approach is that it will make make governance harder to measure or compare across corporates, but if that is the cost of true substance over form, perhaps that's no bad thing.
  • A recent report suggests that it is possible for organisations to measure the effectiveness of their whistleblowing procedures by comparing their performance with regional benchmarks. However, I think that comparing the volumes of whistleblows is too simplistic. It’s too easy to argue that a high number of whistleblows is good sign because it shows that employees know how to make reports, and it’s also too easy to argue that a high number of whistleblows is a bad sign because it means that there are serious flaws in the organisation which need to be reported. Comparing case closure (investigation) times or the percentage of reports which are made anonymously may be a better approach. trust.navexglobal.com/.../2017-emea-apac-whistleblowing-hotline-incident-management-benchmark-report.pdf