CORPORATE GOVERNANCE Good Governance: All you need to know

There’s probably no one better qualified to write about governance than Doug Matheson and no one more committed to seeing it more widely adopted in New Zealand – by companies, public sector and not-for-profit organisations.
The Complete Guide to Good Governance researched by Doug Matheson over number of years, and to be launched at the NZIM/AAMO International Leadership Summit 2004 in Auckland this month, is significant on number of accounts. It is the most complete yet written on the practice of governance in its widest sense – well beyond the legally defined purposes, roles and functions; it is completely up-to-date; and it is detailed but very practical ‘how to’ guide for any organisation governed by ‘board of directors’, ‘board of trustees’, ‘council’, ‘committee’ or similar governance structure. The aim of the book is to provide resource of practical use to all chairmen, directors and management.
As author Matheson writes in his Pre-face: “This book is not book of theory, an academic book, or book by someone merely observing or commenting on governance. It is book of best practice distilled from research, study, observation, practical experience and teaching. I have been chief executive, and am an experienced director and chairman. I have spent over 25 years studying, analysing and practising governance and management. In defining best practice I have been greatly influenced by the governance and management successes and failures of the last few years.”
He goes on to say: “I have applied and practised much of what is contained here in wide range of organisations. I preach what I try to practise.”
The Complete Guide to Good Governance is particularly valuable because it addresses current issues: the organisation’s values, beliefs, culture and style; balancing stakeholder interests; franchising; management buyouts; mergers and acquisitions; takeovers; the co-operative model; directors and managers owning shares; ethics and codes of practice; and what was learnt from Enron and other corporate scandals.
Matheson writes: “Governance is distinct function in almost every organisational arrangement today. It is used for government. It is used for companies. It is used for not-for-profit organisations, sports bodies, schools, trusts, and voluntary organisations – everywhere. Effective governance has become important to the wider society because most of its activities are controlled and managed by governance arrangements. Effective governance is increasingly recognised as the critical success factor for all types of organisations.”
Apart from his passionate concern for good governance, Matheson wrote the book because so many books and articles on the subject have concentrated almost entirely on fiduciary and legal accountabilities, and on shareholder responsibilities and relationships. He was concerned that little attention had been given to the vitally important ‘practice of governance’.
He writes: “Observers of governance and management have written number of books, but unfortunately very few demonstrate an appreciation or understanding of the real nuances of best practice and effective governance from having been ‘in the hot-seats’. I have complemented my experience with reading, research and observation so that this book can be practical combination of experience and research. I have read and evaluated many annual reports and thousands of newspaper and magazine articles on governance of particular organisations.”
Matheson believes governance – and sometimes the lack of it – will become major issue in the early decades of the 21st century – and in all sorts of organisations, not just companies.
As he says: “I am very mindful that today the environment for all organisations is becoming more challenging than it ever was in the past. Frequently today ‘the platform is burning’ and to survive long-term the organisation must continually improve its performance. The board and management must have the ability to continually identify opportunities and risks, to quickly act and to refocus. Often they cannot foresee the real potential until they begin to do things differently, or begin doing different things. Doing things differently, or doing different things, often identifies further potential that was not previously apparent and that is exactly as it should be.”
The Complete Guide to Good Governance aims, says Matheson, to help directors with today’s key governance challenge of how to achieve the full potential of the organisation.

Leadership
“Chairmen and boards of directors generally play an inadequate leadership role in the organisations they lead and govern… The chairman and the board must provide overall visionary leadership. board focusing on narrow view of governance as fiduciary and compliance obligations is not providing leadership.”

Ethics
“Directors must accept that commitment to ethical practice and integrity is not restrictive on an organisation – quite the opposite. Public attitudes have hardened over recent years and increasingly there are positive effects for organisations which demonstrate ethical behaviour… Increasingly organisations are turning their collective minds to being good citizens. Ethical conduct and practice are becoming an important part of how they relate to customers, suppliers and the outside world.”

Executive Directors
“Boards with executive directors do not scrutinise management to the extent independent boards do… The judge and judged are on the same side… Those who argue it makes no difference ignore the realities of the tension between governance and management that is an important ingredient in achieving the highest levels of performance.”

Governance and Management
”The distinction between ‘ends’ and means’ is sometimes used to explain governance versus management; boards define clearly the results (ends) they expect the organisation to achieve, and management are responsible for operational matters (means) to achieve the results. But governance and management are much more complex than that and much more interdependent than that description suggests.”

Restructuring
“Organisations ruthlessly shedding employees as consequence of introducing new technology frequently fail to take adequate account of the knowledge base. Skilled staff and the way they are treated, not technology, will most often be the major factor in deciding the fate and future of the organisation.”

• The Complete Guide to Good Governance in Organizations and Companies by Doug Matheson, published by Profile Books. 576 pages. $69.95. Copies are available from Profile Publishing – www.management.co.nz

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