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Moving In The Direction Of Dynamic Governance

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Moving in the Direction of Dynamic Governance

With the continued drive for Foreign Direct Investments (FDI’s) in Africa, what has become eminent is that change is becoming ever present in the way African organizations are carrying out their businesses.

The development of corporate governance practices in African organizations, the increased expectations that some of these organizations are growing to become major world brands and major contributors to the global economy have brought about the needed change and investments in Africa.

With this evolution, the focus of the boards of some of the African organizations preparing to seize the opportunities for becoming world class brands is beginning to shift from compliance to excellence. As such these organizations are importantly paying more attention to corporate governance within their organizations; however they have ensured that this attention does not dominate the agenda of the board discussions to the detriment of spending enough time to ensure business sustainability.

It is important to note that corporate governance can and will never stand still. There are continued changes in the expectations of the board considering the fact that African organizations are operating in a globalized economic system and the hypercompetitive and turbulent markets.

With this, African organizations should understand that they must continuously develop their governance systems in a manner whereby the board realizes the need to move beyond mere compliance to creating a flexible and dynamic system of governance.

The demand for dynamic governance must be hinged on the realization of the following

  • Leadership starts at the Board level. How, and to what end, leadership is exercised by the board of directors of a company sets the standard for any organisation
  • Governance is a means of enabling and driving business performance. All things being equal, well governed companies excel

 

The reason to adopt these new realities of dynamic governance is because this approach helps them respond quickly and adaptively to the changing circumstances of business. This approach is based on the appreciation that the most efficient and effective companies are the ones which anticipate the happenings and the goings on in the business world.

 

In short it is wise to say that the best companies do not wait to be governed; rather they shape the issues which relate to governance. Also obvious is that dynamic companies do not make corporate governance a one size fits all compliance exercise.

 

Key to all this is a belief that corporate governance is not an act of compliance but that there is a spirit of governance. This spirit is inextricably linked to the culture and performance of an organisation. The best organizations explore what this spirit really means and what its implications might be. It is not minimal compliance, but maximum engagement and impact.

 

Dynamic governance demands that boards be more externally focused. They need to be connected with a broadening range of stakeholders and society. As Sir Adrian Cadbury said, corporate governance “should recognize the rights of stakeholders established by law or through mutual agreement and encourage active co-operation in creating wealth, jobs and the sustainability of financially sound enterprises

 

Based on all this, what are the characteristics of dynamic governance? This can be categorized into six characteristics that boards of organizations need to develop in order to achieve dynamic governance. However it is important to note that the route to good corporate governance lies in the understanding and the way we act upon these six characteristics in order to achieve truly dynamic governance.

 

  1. Deep Business Knowledge – Board members must understand the commercial DNA of the organization
  2. Diversity of Thought – This is the most critical attribute consistently identified as important to the effectiveness of the board. That is that the members have the right balance of skills, knowledge and experience to constructively challenge management
  3. Engaged Leadership – The chairman must act and be seen as the guardian of dynamic leadership. He must choreograph the board and show true leadership
  4. Strategic Alignment and Execution – The board must use their knowledge and experience to help the executives develop robust and sustainable strategies
  5. Capacity to Adapt – in these times of changes, boards must be able to change the direction and to track with strategic, financial, market and human changes
  6. Leadership Talent – The heart of governance truly lies in identifying, developing and utilizing talented people. As such there is the need to for talent and succession planning to be at the top of the board agenda and this must be acted upon regularly.

 

In conclusion for organizations to build dynamic governance systems there is the need to understand these characteristics and how they will help improve on the role of the board in terms of supervision and direction.

 

The challenge to us all as organizations and members of such organizations – individuals, directors and leaders could not be more precise than “to embrace change in order to maximize performance”

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