Company governance is vital yet often overlooked - Rashmi Dube

Good governance sits at the heart of any organisation.

Group of office workers in a boardroom presentation. Photo by OJO Images / Rex Features

This is something I have talked about in previous articles here in The Yorkshire Post, so when the press uncover a story that goes to the heart of good governance, it is always a good lesson for all directors, including non-executive directors.

It offers them a reminder to take heed and consider what is required of themselves in terms of duties, good character, and leadership.

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We are lucky in Yorkshire to have several excellent organisations leading the way such as Harrogate Water, Bettys, and Yorkshire Tea. Yorkshire is en-route to becoming a hub for imports and exports. It is the next move, post-Brexit and important for getting out on the other side of the pandemic.

The Yorkshire brand has always been strong and is fast becoming a globally recognised brand, just as much as Made in Britain.

Given that we have the largest manufacturing base in the country and the UK’s largest financial centre outside London, what is not attractive about Yorkshire?

So as we get our houses as a business in order, it is critical to review the whole organisation and ensure that we are building relationship with other international brands.

An important aspect to consider will always be the ESG – Environmental, Social and, of course, Governance. The need to pay attention to this has grown.

The McKinsey report of November 2019 outlined the top five benefits as:

Improving top line growth.

Reducing costs.

Minimising regulatory and legal interventions.

Increasing employee productivity.

Optimising investment and capital expenditures.

Each opportunity presented to a company should be approached with ESG in mind.

Most businesses focus on the environmental and social, and often forget about the “G,” or governance, which is what it felt like sitting on the outside and watching the press reports on several board resignations at the Royal Institution of Chartered Surveyors.

I had to ask myself, why would such a strong brand not be concerned about governance?

The issue, to me, started back in January this year, when it was faced with calls to have an independent inquiry as a result of the removal of four directors who had raised serious concerns about the financial reporting.

Good governance and good practice stem from the board and those responsible for it should have the interest of stakeholders at the forefront of their minds.

At any time when board directors raise alarms, the executive and chair need to be responding with immediate considered action to investigate the matter, and potentially review the most appropriate way to bring in an external party – particularly in this case given the concern was around finance.

What happens in practice with some organisations is that, despite the alarm bell ringing clearly and awfully loudly directly in their ear (often because internal employees/managers or non-executive directors (NEDs) have raised concern), either the mentality of the ostrich takes hold – do nothing and it will sort itself out and go away, or simply people will stop talking about it – or they decide to go with ‘let’s fix it but not report to anyone that there was an issue’. But who is in charge? Who is running the ship? The CEO? The Chair? The Board?

The ship’s in trouble. It has several leaks and at some point, the other ships in the water are going to notice and want to ask ‘what did you do?’

At this point, no matter if the organisation was the ostrich or shooting resolutions from the hip, the entire board is responsible, and each director’s reputation is on the line as well as the organisation’s.

The point is this – where an organisation has taken years to build a brand and reputation, for instance in manufacturing, and is looking to expand its horizons by exporting and building new relationships, there can be a tendency to focus on just going forth and winning the work (ultimately that’s sales).

Yes, it is important – it feeds the cashflow and helps build profit – but to make a long lasting, sustainable organisation with a resilience plan in place, it’s necessary to ensure that not only is the board operating with good governance practices, but the full approach to ESG is in place in every nut and bolt of the organisation.

After all, Made in Yorkshire means something.

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Thank you

James Mitchinson