Why your company “governance” may not be so boring after all

Why your company “governance” may not be so boring after all 😉

Actions for any size company … including some illustrations from the SVB meltdown.

“Governance” is for any size company, and how well governance is carried out can affect company success.

If there is a Board of Directors, then overall governance is the Board’s responsibility. If there is no Board – common in smaller companies – then governance is still needed but is fully the responsibility of company owner(s)/leaders.

The triumvirate of mission, values, and vision is the foundation for any effective company and for effective governance. A clear picture of mission and values guides establishing vision and evaluating progress.

In a recent post, we looked at the how any company can implement values more effectively and demonstrated in everyday work.

This time, let’s look at how to ensure meaningful results for key company stakeholders.

For long-term success, a company must balance needs and success of three basic stakeholder groups: customers, employees, and owners/shareholders. A company cannot exist for long without customers, employees to effectively serve the customers, and company finances that allow the company to serve those customers and employ those employees.

Adding a fourth group makes sense for most: any significant other stakeholders to which the company is committed to a mutually beneficial relationship. We now have, as Blanchard and O’Connor termed in “Managing By Values,” the “C.E.O.S.“:

• Customers,
• Employees,
• Owners/Shareholders, and
• Significant other stakeholders.

The ”S” is where communities, key vendors, environmental concerns, etc. would go if desired … including the “E” and “S” in ESG (Environmental, Social, and Governance). A company can elevate one of these separately to the level of C.E.O.S., but that must not detract from business basics. And definitely don’t have two separate planning, tracking, and evaluation processes … this would lead to confusion and dilution.

The C.E.O.S. factor into governance in many ways.

• One way at the strategic level is a cross-check against company values. Do the values provide benefit across the C.E.O.S. or primarily one stakeholder category?
• Another top-level check is against strategic plans. Do plans and related metrics target all the C.E.O.S.? Some or one group? If the latter, is this temporary to rebalance or is a rethink needed of company focus?
• Tactically, projects can be checked against the values and C.E.O.S. And values should certainly apply to performance management.

There are many ways that values and the C.E.O.S. should be woven into the company’s being.

There will likely be interesting case studies coming out of the Silicon Valley Bank (SVB) failure.

One key aspect will be independent of politics, pro- vs anti-ESG views, etc.: how governance can affect company success.

In SVB’s case, there seem to be some disconnects.

For one, there doesn’t seem to be any meaningful connection between the values and strategic or ESG plans as evidenced in their website, annual report, or other filings. Also, their values appeared to be ultimately meaningless and not practical or useful from the perspective of day-day decisions and behavior … how values are demonstrated in everyday work and the level of diligence in doing so. (more in an earlier post)

Things don’t appear to be much better from the C.E.O.S. – Customer, Employees, Owners/Shareholders, and Significant other stakeholders – perspective.

The C.E.O.S. aren’t explicitly identified in SVB strategic plans (again from their website, annual report, or other filings) nor any analysis of how the stakeholder groups are balanced in any factors. While the currently available information does allow some assumptions to be made, assumptions are not clear governance.

Matthew Sekol did an interesting analysis on SVG’s treatment of ESG in a recent article (link in comments). NB: don’t let “The ESG Advocate” title turn you off from the considering some of the governance analysis, even if you disagree with his viewpoint or opinions, or with ESG in general.

• A key point of his for this discussion: “nowhere do they tie this information [ESG strategic initiatives and related stakeholder types] back to the core of the business.”
• Also in his analysis, the ESG strategic initiatives did not explicitly identify which of the C.E.O.S. would benefit … Sekol had to make some assumptions. And the assumed representation was C.E.S. with governance being the only factor that would cover the “O.”

Assumptions do not make for good governance.

Sekol sums it up by saying “Governance will get you every time” … for better or worse.

Your turn … how is your company doing governance-wise?

Can you easily tell how the company has done regarding:

• Achieving its mission? Vision?
• Living its values?
• Serving the C.E.O.S.?
• How what you say you believe (or the company broadcasts) compares to actual performance?

Can the employees easily tell? Stakeholders?

What actions do you need to take to improve?

👉  Need help with making your company governance more effective? Contact me to discuss how to do that.

 

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