Developing good governance
Trust and confidence are the most significant casualties of the financial crisis. All organizations are under greater scrutiny. They are expected to explain their business practices, disclose critical relationships, justify their remuneration models, discuss their succession plans, and make a broader contribution to society.
They have to answer to investors, regulators, and the general public. With globalization, many organizations are engaging with a more diverse mix of stakeholders, each wanting different kinds of information.
The digital technologies are transforming the way we communicate. People can see – and say – more about the organizations that serve them. New forms of risk, are also emerging, and the regulatory burden is increasing. So the pressure to be transparent, accountable and socially responsible is more significant.
What does this mean for your business?
Any organization that wants to survive will have to embrace new regulations and technologies, manage new risks and prepare for the future with robust succession planning for boards and management. That means most organizations will need new governance models.
Top management will also have to assume more supervisory responsibilities, and simple compliance with the rules will not be sufficient. Management must communicate its governance policies, processes and organizational culture to all its stakeholders. It will also have to go beyond traditional reporting and address issues such as sustainability and tax contributions.
Transparent disclosure is the key to building trust and changing the way stakeholders and the external markets view your business. But transparency alone is not enough. Demonstrating good governance involves creating an authentic dialogue with stakeholders, not just communicating openly.