As governance hits the headlines – for all the wrong reasons – a stark reminder has been served about why good governance must be a priority if 2021 is to be successfully navigated, writes Megan Motto.
With board disarray and corporate failure firmly in the headlines, some major players in the business world are off to a tumultuous start to the new year, raising questions on key governance issues and capturing the attention of many other executives and boards eager not to head down a similar path.
Dominating those headlines right now is Crown Resorts, having officially been deemed unsuitable to hold a casino licence in NSW and losing three directors, plus its chief executive, in quick-fire succession.
With the year off to such a rocky start, it seems prudent to take stock of some of the key governance and risk management lessons so far in 2021. It is clear that:
- The role of boards is in the spotlight and good governance must be prioritised from the top-down.
- Directors need governance skills and knowledge.
- Culture – a key tenet of governance – must be brought to the fore.
Much of this goes to the heart of governance.
So, why are we seeing this level of corporate implosion, at the beginning of a year that held out so much hope for a fresh start?
For Crown, the release of the Bergin report following an 18-month inquiry has prompted the latest instalment of corporate unravelling, exposing in no uncertain way some major governance questions.
This very public saga has served as a firm reminder to all organisations that effective risk management and key corporate governance principles must rise above any personality-based issues, that quick action is needed when the warning signs become evident, and transparency and good culture are not negotiable.
Importantly, not even a devastating global pandemic is going to keep governance failure off the public radar. Reputation risk – another key vulnerability in these times – is a major threat to organisations and must be part of any risk management framework.
For those organisations eager for some smooth sailing, especially as they try to focus on navigating the path out of the pandemic, some key governance principles will provide sound guidance.
Checklist: Good governance and risk management in 2021
- Conduct a regular review of your governance systems. It makes good business sense as the value proposition of your company rests on sound and accountable governance.
- Focus on transparency, accountability, independence, diversity, and purpose. Board composition and practice must stand up to scrutiny.
- Culture, culture, culture. Is your organisational culture reflective of the purpose and values set by the board? How clearly is the board able to maintain oversight and monitor culture? Do the board’s own actions stay true to the cultural underpinnings they have set? Do you have a strong whistleblowing policy?
- Review your remuneration policy. Stakeholder interest and scrutiny are on the rise. Ask: how well does the remuneration structure reflect the culture and long-term value of the company?
- Stakeholder engagement. Boards have a key role to play in the relationship with stakeholders. Ensure your communications strategies enable transparency, clear and meaningful engagement.
A major reform program is now underway at Crown Resorts, with executive chairman Helen Coonan quoted as saying: “The board is determined to maintain the momentum as Crown takes significant steps to improve our governance, compliance and culture.”
But good governance, compliance and culture simply cannot be afterthoughts – seen perhaps as a quick-fix bandaid when things go wrong.
Governance is at the heart of every organisation – and can make or break a business.
A firm focus on key governance and risk management principles at the beginning of 2021 must be a priority for businesses seeking to successfully navigate the already unpredictable months ahead.
Megan Motto is the CEO of Governance Institute of Australia.