• 16 Oct 2019
  • SBS-ED
  • 5Min

How to successfully implement ethical corporate governance

How to successfully implement ethical corporate governance

Educating current and future leaders with corporate governance and ethical practices could foster a culture of ethical organisations in Africa.

What could a more ethically governed Africa achieve? With a young population and vast potential, the continent could achieve so much. However, while corruption and a lack of corporate governance remain pervasive, we are unlikely to reach even a fraction of our collective potential. Instilling a culture of ethics at a board level could make a tangible impact. But it will take tight regulation, ‘policing’ and deep commitment.

What is corporate governance?

Corporate governance is the system of rules, practices, and processes by which a firm is directed and controlled. It essentially involves balancing the interests of a company’s many stakeholders and provides the framework for attaining a company’s objectives, encompassing practically every sphere of management.

What corporate governance structures are used in South Africa?

South Africa – and the UK – have excellent roadmaps for ethical corporate leadership and are seen as global leaders in this regard. Our progressive Company’s Act and pioneering King IV are revered for their focus on transparent, inclusive leadership for all kinds of organisation, and have become invaluable cultural roadmaps.

Prof Deon Rossouw of The Ethics Institute believes “too much attention is still spent on anti-corruption instead of building ethical conduct and culture, as advocated by King IV.”

What are the key challenges to corporate governance in South Africa?

Corruption and resources.

Roger Hitchcock, senior partner at the Sirdar Group, which trains African governing boards on ethical leadership, says: “These mould people’s ideas of what it means to be successful. Luckily people are now moving away from this mindset, but the challenges will remain as long as people still make money off being corrupt.”

The role of the board of directors

Professor Arnold Smit, Head of Social Impact at USB-ED, says that all over the world, boards that ‘get it right’, have important characteristics in common.

“They set quality time aside for discussions about ethics and culture; they regard it as quite normal to have ethics conversations pertaining to strategy, risk, remuneration and finance. There is very little on a board agenda that may not be eligible for a values discussions and ethical considerations.”

How to create a board with accountability

  • Appoint a board chair with integrity who values new school corporate governance
  • Appoint a diverse board of people with good reputations, not just financial successes
  • Appoint an ethics subcommittee to make it a practiced value for all in the company
  • Apply a separation of powers between the CEO, board chair and board members
  • Beware of personality cults and clashing egos as these always sow destruction
  • Weave ethics and values into all conversations, reports and agendas at board level
  • Shun old-fashioned, purely shareholder-centric practices that focus only on money
  • Clearly define roles and responsibilities, and build trust and respect between players
  • Make it the board’s responsibility to define long-term company vision and values
  • Make it the CEO’s responsibility to see that the board’s vision is implemented

 How to implement effective corporate governance

Andringa, who has consulted to more than 300 non-profit boards across America, on the Flourishing Culture podcast says his best advice to boards and CEOs is to:

  1. Get their best practice principles down in writing and stick to them in every meeting
  2. Clearly define the roles and responsibilities of company boards and chairs vs the CEO
  3. Foster good trust relationships by making time to chat regularly, formally and informally, and to schedule formal meetings and reviews in advance
  4. Send the entire board for further education and training to define in writing their shared values, roles, responsibilities, parameters around executive actions
  5. Disclose conflicts of interest or internal tensions and remain independent in their roles

Finally, Andringa says board members must take pride in their roles, strive to be good at it and show integrity. “Good governance is one of the most important strategies for building a healthy, flourishing culture in the workplace,” he concludes.

The impact of ethical corporate governance on employees

Boardroom veteran Hixonia Nyasulu, currently Unilever’s global board director, says company culture always has an impact on employees. She defines it as a set of values, traditions and behaviours that make up a company’s personality.

“Integrity is doing the right thing when no-one is watching you and being authentic about your values. If you have a bad reputation, you’ll find it waiting for you in the next boardroom.”

But, says Nyasulu, it’s never too late to change your company’s culture.” A principled new leader changes everyone. Good leaders direct the campus of the company and set the tone at the top which gets the whole organisation rallying…”

She adds that good leaders bring good personal values into their roles. “It’s important and you’ll be surprised by how that drives profits. Those companies attract the best talent and loyal customers. Everyone loves a team player.”

Bob Andringa, author of Good Governance for Non-profits: Developing Principles and Policies for an Effective Board, says there is “no simple, single, magical solution to good governance, but it’s not rocket science.”

As a board member, with a sense of pride in your role, it’s important to showcase integrity and build good governance within your organisation in order to create a flourishing culture within the workplace. HR and business leaders need to educate board members on good corporate governance and ethical practices in order to empower them to govern the organisation with confidence, purpose and skill.

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