Ever since I started working on corporate governance I realized that the people that do not work on this field tend to ask these two questions: ‘what is corporate governance?’ and, ‘does that mean that you work for the government?’ Over the years, one learns to elaborate simplified explanations of what one’s work is and how fascinating it gets.
However, what truly worries me is not that I still receive the aforementioned questions but, instead, to see that some people who do work on the field or some who occupy relevant management roles at publicly listed companies believe that corporate governance is either ‘something’ that they need to tick from a checklist just because they are required to (by law), or worse: ‘somewhere’ where there is no rush getting at as it is a dark place with visa requirements, one where owners should give up control. Both beliefs are mistaken.
As its name implies, corporate governance revolves around how a corporation is governed. And, as we know, every company is or can be run or governed differently –there are no one-size-fits-all recipes for success. However, we do believe in the premise that good corporate governance consists of welcoming tailored solutions that aim to reduce information asymmetries and that align a company’s operations with the correct set of values.
To diagnose a company’s governance, it becomes important to know who owns a company and who runs it (are they the same people?); who is building the company’s strategies and why; how are decisions being made; how risks are being analyzed and handled; which accountability mechanisms are in place; how its operations and numbers are being reported and via which platforms; or who its stakeholders are –amongst many other things.
In other words, to truly understand a company’s governance, one needs to ask many different questions that go from management to psychology, from operations to ethics, and from human resources to crises management. The quality of the answers will be highly correlated with the governance consultants’ knowledge and experience to make the right questions.
So, yes: even though a ‘corporate governance checklist’ might come in handy at first to know in which direction a governance assessment may begin with, the truth is that behind every precise diagnose (one that results in both robust conclusions and practical solutions), there is a capability of interweaving different theoretical spheres with case-specific realities. Put other way, corporate governance does not mean that control should be given away, nor does it mean that a company’s board should have more women –just to mention an example. Everything will depend on a case-by-case analysis.
Corporate governance is not synonymous with strict sets of rules, nor is it synonymous with having the ‘ability’ (there may be a little bit of irony here) to tick all the criteria on governance checklists; good corporate governance is about making the right questions in order to blend in the correct sets of values that catapult what a company needs to endure in time.
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