I clearly remember reading Don Watson’s ‘Dictionary of Weasel Words’, in which he highlights all those government- and corporate-speak clichés that, carefully crafted to mislead or misinform, have crept into our lexicon at an increasingly alarming rate.
I remember, too, being somewhat surprised to find the word ‘governance’ sitting alongside gems like ‘negative patient outcomes’ (read: you’re dead) and ‘downsizing’ (read: slashing employment).
But the more I thought about it, the more it made perfect sense – the word ‘governance’ has become rather nebulous and is bandied about by many who don’t actually know what it means…it just sounds good and, more importantly, it makes the person uttering it sound knowledgeable.
So what does it actually mean?
In a corporate sense – be it a commercial or not-for-profit entity or a statutory authority – if the body has certain objectives to achieve, the term ‘governance’ applies to it. These bodies are owned by shareholders, members and the responsible Minister on behalf of the Crown respectively, but more often than not, there are too many or too few of them to allow it to work efficiently.
That was when, back in England in the 1800s, they came up with the concept of a board – a small group that will ultimately be responsible for how that entity works. The board represents the owners…and in larger entities where operations require many hands, the board employs management and staff for those purposes.
The entity’s constitution or rules and regulations will normally stipulate that the owners delegate ownership powers to the Board who more often than not need to appoint management and staff to run the show day-to-day. There are, however, certain key activities the Board cannot attend to without the owners’ approval – appoint itself (in the form of chair and directors), approve accounts or change the constitution.
Corporate governance, in simple terms, means which of the three organs – owner, board or management and staff – must take the decision to do something.
It’s all about having clarity…it says ‘this is what we do, this is what you do and never the twain shall meet’.
Good corporate governance will deliver a clear and unambiguous answer to that question as there will be systems, policies and processes in place to ensure that everyone knows precisely what decisions rest with the owners, the board and the management and staff in any given situation.
And while the dividing line for decision-making between owner and board is almost always clear because it’s outlined in the legislation and constitution, you’ll invariably find that it gets blurred and messy between board and management. That’s because the legislation and constitution don’t cover this. Rather, it’s left to be detailed via board policy – something boards usually don’t do very well.
Hopefully, this brief explanation will help in some small way to lift ‘corporate governance’ above the murky world of weasel words…