Corporate Governance as a Pillar of Organizational Culture: Ethics, Transparency and Results
Corporate governance goes beyond simply complying with rules and regulations. It is a genuine commitment to organizational culture, to the way of working and to the agreements built around ethics, transparency and accountability in every area of the company. According to the Edelman Trust Barometer 2023, 81% of employees consider trust in their employer a decisive factor in whether they stay with the company. That is why working on governance with transparency is essential, and an external perspective can be valuable in achieving it.
How do you implement good corporate governance practices?
To better understand the structure and components of effective corporate governance, we can picture it as a pyramid in which each level represents a fundamental aspect:
Level 1: business infrastructure and compliance (the base of the pyramid)
• Understand and prioritize requirements: Identify and prioritize legal and regulatory needs.
• Impact analysis: Assess the impact of decisions on the different stakeholders.
• Operationalize: Implement processes and systems to meet the requirements.
• Testing and remediation: Run tests to ensure compliance and correct deviations.
• Monitor and report: Oversee compliance and produce reports for senior management.
Level 2: business management (the body of the pyramid)
• Business strategy: Define the company's strategic direction and its long-term objectives.
• Risks: Identify, analyze and respond to the risks that could affect the achievement of objectives.
• Vision and objectives: Establish a clear vision and measurable objectives for the organization.
Level 3: corporate governance (the top of the pyramid)
• Oversight and monitoring: Oversee the company's performance and ensure compliance with policies.
• Corporate policies: Establish clear, transparent policies to guide decision-making.
• Governance structure: Define the structure and roles of corporate governance.
• Planning and risk appetite: Establish the level of risk the company is willing to take.
• Identification and documentation: Document key processes and decisions.
• Analysis: Analyze data and information to make informed decisions.
• Risk response: Implement measures to mitigate the risks identified.
• Follow-up: Monitor the effectiveness of the measures implemented.
Building a solid corporate governance culture: key steps that cannot be missing
• Strategic planning: Clearly define the organization's purpose, roadmap and key objectives at company and area level. This should be done annually and, if necessary, revisited throughout the year, why not. What matters is adapting to the environment and to reality, while being objective about why a change is being made.
• Values and principles: Establish the ethical pillars that will guide decision-making and the behavior of every member of the organization. These pillars must be translated into behaviors, actions and statements that accompany leaders, who must lead by example.
• Organizational structure: Understanding roles and responsibilities empowers people over the decisions they must make and the results expected of them. Structure design goes beyond the image of an org chart and focuses on how the parts interact day to day.
• Communicate and train: Make sure all employees understand the previous steps. This phase is about sharing and, even more importantly, OWNERSHIP.
• Control mechanisms: Establish guidelines and actions that promote transparency, accountability and risk management. Track results rather than tasks.
• Encourage participation: Fostering spaces for dialogue and participation where employees can freely express their opinions and concerns is crucial. Constant calibration exercises and responding to the real needs of the business and the team ensure that initiatives remain relevant and effective. Participation must be free from retaliation; opening spaces means listening to and validating everyone. Validating does not mean accepting unconditionally, but guiding and improving continuously.
• Evaluate and improve continuously: Run periodic assessments of the corporate governance culture and adjust practices as needed.
Conclusion
Corporate governance is not a document. It is the dynamics lived every day in the organization, and they define its culture.
