What do your organisation and this phrase have in common? If your director and/or senior management team is not practicing good governance, the success of the entire organisation could be at stake.
“The Fish Rots from the Head” is the title of a book written by Bob Garratt (2010). This informative guide sums up the consequences of a lack of good corporate governance. Mervyn King (2006) defines governance as “the manner of directing and contributing to the actions and affairs of an entity.” King also describes the duties of a director or board member as “the duty of skill, due diligence, care and good faith.” In terms of these duties, a board member has a responsibility to:
- Contribute and apply their skills
- Always act in good faith when making decisions on behalf of the organisation
- Take care of the organisation’s assets in a responsible manner
- Diligently prepare and familiarise themself with the environment in which the organisation functions
These duties necessitate and lead to certain key responsibilities of boards, such as:
- Supporting and evaluating the CEO
- Planning effectively
- Monitoring and strengthening programmes and services
- Ensuring adequate financial resources
- Protecting the organisation’s assets
- Providing financial oversight
- Ensuring legal and ethical integrity
The board is also responsible to enhance the organisation’s public standing and to ensure that the board’s competence is continuously improving.
If the board is committed to carry out its duties and responsibilities, the organisation is more likely to be an accountable and sustainable entity. The board will also be in a position to ensure that the organisation has the necessary resources, leadership and oversight to carry out vital activities. The board should fulfil the role of being the guardian of the mission, vision and objectives of the organisation.
If the board meets these responsibilities and duties, the result is accountability and organisational sustainability. In terms of accountability, there are certain questions the board needs to constantly ask itself when it has to make critical decisions in the interest of the organisation. King (2006) refers to these questions as “silent questions” and describes them as follows:
- Do I, as a director of this board, have any conflict regarding the issue at hand?
- Do I have all the facts to enable me to make a decision on the issue at hand?
- Is the decision being made a rational business decision?
- Is the decision in the best interest of the business?
- Is the communication of the decision to the stakeholders, transparent?
- Will the company be seen as a good corporate citizen as a result of this decision?
- Am I acting as a good steward of the company’s assets when making this decision?
- Have I exercised the concepts of intellectual honesty in acting on behalf of the organisation/company?
- Have I understood the material supplied or provided to me to guide the decision?
- Will the board be embarrassed if this decision appears on the front page of a national newspaper?
In the light of the above, it is critical for the board to ensure that it conducts regular self-assessments in order to stay relevant. Performance assessments can help the board:
- Refresh its understanding of its roles and responsibilities
- Identify areas of board operations that require improvement
- Measure progress towards achieving organisational goals and objectives
- Guide future board operations
- Build trust, communication and respect between the board and the CEO
- Enable board members to work as a team
- Allow board members to evaluate for themselves when it is time to move on
In summary, a good place for your board to start reviewing whether or not it is in a healthy state is by implementing the “silent questions”. In addition, it is vital to ensure that the board is able to answer those questions and for the organisation to start developing a basic framework to measure the board’s annual performance.
Ingram, R. T. 2009. Ten basic responsibilities of non-profit boards. 2nd edition.
King, M. 2006. The Corporate Citizen.
Garrat, B. 2010. The fish rots from the head.
A|W Management Consulting’s key aim is to support and advise entities on how to become sustainable organisations with good corporate governance and effective human resource management. We can be reached at email@example.com and www.awconsulting.co.za. Like our Facebook page.