No one disputes the importance of good governance. It is seen as key to ensuring that organisations are effective by providing checks and balances, strategic overview and additional skill sets to complement the staff. In fact American author, journalist and researcher Rebecca MacKinnon summarises this nicely by saying ‘governance is a way of organizing, amplifying and constraining power’.
But what does good governance look like, especially for small organisations where the number of people sitting on the board can outweigh the size of the staff team. And given this, can a small team provide the support and resources necessary to ensure the board can fulfil their remit adequately?
Julia Unwin, former chief executive of the Joseph Rowntree Foundation, identified the ‘five Ss in governance’. These are Support, Stretch, Scrutiny, Stewardship and Strategy.
The board needs to support the staff team by encouraging the executive, celebrating achievements and helping to problem solve. It should challenge the team (constructively), encouraging a culture of seeking and adopting good practice and driving improvement to help stretch the organisation. Scrutiny is essential to ensure checks and balances around critical decision making and robust risk management of existing and new activity. This scrutiny ensures staff feel confident in the decisions they have taken as well as providing assurance to funders and investors. Boards should see themselves as guardians of assets – commercial, intellectual and reputational. This stewardship should ensure the long-term viability of the organisation by protecting those assets that underpin organisational mission and purpose. Boards should also make strategy and set direction but in consultation and engagement with other stakeholders. They should bring a range of experience and external viewpoints to add to the team’s own vision of direction and impact.
Culture and governance are now a focus of the Financial Conduct Authority (FCA). A key part of this is the Senior Managers & Certification Regime (SM&CR), which creates a formal link between the behaviour of individuals and the conduct of the firm. The ‘five Ss’ provide a useful framework through which boards can engage with and understand the SM&CR and ensure relevant implementation.
As a trade association, Responsible Finance supports its members to lead the way in implementing good governance. Recent training for our members on ‘culture and conduct’ looked at SM&CR and how they can implement it in a way that has a positive impact on consumers. We are also designing an on-line bespoke support programme for new members of boards in the responsible finance sector so they can fully contribute to organisational success. Do look out for more information on this in coming weeks.
Many people believe that you can trace every organisational failure back to poor governance. Placing a focus on good governance can only help the ongoing impact and success of the responsible finance sector.
Jennifer Tankard, Chief Executive