EDITOR’S LETTER : Governance – by any name

If you look at the rules and regulations surrounding corporate governance in New Zealand, you will find plenty – from the Securities Commission, NZX, the Institute of Directors and others. One thing they all have in common is that they are largely reliant on interpretation. This makes sense, as you can’t prescribe everything. But doesn’t it also run the risk of ‘wide’ interpretation that perhaps doesn’t produce the best end result for our organisations and their stakeholders. I am open to persuasion on solution for this but, in the course of looking into the different definitions and interpretations, I ran across this from UK scholar and advisor Professor Bob Garrett (reprinted with his kind permission).
“Governance itself can be traced back some three millennia to the ancient Greek ‘kubernetes’. This means ‘the steersman’, the person who gives direction to ship or organisation. This meaning flows through Latin and French language development and appears in Middle English in the Canterbury Tales. But then it virtually disappears. It is not until 1984 that Bob Tricker writes the first book entitled Corporate Governance. After the Maxwell scandal Adrian Cadbury writes report in 1992 for the London Stock Exchange called “The Financial Aspects of Corporate Governance” which puts the phrase into wider circulation in the business and governmental worlds, although it is not until the Enron scandal of 2002 that the phrase is in general use – and abuse.
“This abuse is seen in the growing notion of ‘governance equals compliance’ ie, that provided you have ticked all the boxes demanded by the regulator then you can do anything else whilst still claiming effective corporate governance. This is dangerous and reductive. Remember that Enron was 100 percent compliant under the then US ‘rules-based’ regulations. Such compliance-based system tends to drive out enterprise.”
This is something we can’t afford to let happen in New Zealand.