Video Transcript

Corporate Governance World Observations

Over the past 25 years or so, I’ve noticed that there are two ecosystems that exist in the world of corporate governance. The first is the traditional mainstream governance group. It includes academics and consultants from Harvard University, the National Association of Corporate Directors, the Institute on Governance Board Source, the Institute of Internal Auditors, the Directors, college, and others.

The second is the Policy Governance ecosystem stemming from the work of John and Miriam Carver, their publications, consulting practice, and the Policy Governance Academy. From that came the International Policy Governance Association, Govern for Impact and a growing number of qualified consultants, practitioners, and supporters like the Greenleaf Center for Servant-Leadership.

Two Distinct Approaches

These two approaches to board governance differ in very distinct ways. The traditional group seems to see governance like this, usually a strong CEO or chair and CEO at the center, working in relationship with the board shareholders or owners, and often committees that combine board and staff members.

At worst, it looks like a CEO or chair and CEO at the top of a pyramid, a singular authority over the entire organization. And actually that’s probably how most people picture organizations working.

Policy Governance practitioners see it differently. Authority flows from the legal or moral owners to the board as the governing authority, and then through delegation to the CEO or executive director and on to staff.

And the flip side of authority is accountability flowing in the opposite direction from staff to CEO to board and ultimately back to the owners. The Policy Governance ecosystem is built upon a practical principle based approach that reflects systems thinking and a substantial body of knowledge.

Policy Governance practitioners don’t struggle with questions like how to delegate without micromanaging, how to ensure the board’s values cascade throughout the whole organization, or how to clearly define and measure success. The traditional governance ecosystem tends to promote best practices that often bring a high degree of complexity and cost.

Policy Governance System Addresses Common Concerns

And that leads to a shared frustration amongst many in the Policy Governance community. Challenges still being worked through in the traditional ecosystem were addressed years ago through the application of Policy Governance principles.

For example, “setting the tone at the top” is addressed through owner accountability and board position principles for starters. Enterprise risk management is addressed through executive limitations and the monitoring system. ESG priorities are addressed through the board’s expression of its values and reinforced through policy compliance and performance monitoring. Traditional strategic planning looks more like strategic agility in the Policy Governance world where accountability is clear and performance is measured by achieving ends while remaining in compliance with executive limitations.

So those of us in the Policy Governance ecosystem naturally want to bring these practical principle-based ideas to those working in the traditional model. For my part, I’ve reached out directly through calls and emails, meetings and participation in their events and even presenting at some of them. But those experiences have ranged from polite indifference to at times outright rejection. And I’ve heard similar stories from others, so I know it’s not just me.

Kudos for Policy Governance Theory

Policy Governance as a theory has received recognition from respected figures like Sir Adrian Cadbury, Robert Monks, and Kenneth Blanchard. Its principles are also reflected in ISO 37,000 guidance on governance.

So what next? I think we need to have a conversation about what governance is for and to whom a board is ultimately accountable.

What do you think? This is Susan Mogensen with Brown Dog Consulting.