Launch of the White Paper on Corporate Governance at The Sir Adrian Cadbury Lecture October 29, 2020
Opening speech by Deirdre LaBassiere, Chair, The Lunar Society
Many organisations operate a ‘tick box’ approach to governance which presents particularly nuanced challenges – but good governance is central to the success of every organisation no matter how small, how complex, where it is based or what it does, Lunar Society members and guests heard at the launch of The Lunar Society’s Governance Inquiry.
Appropriately, The Lunar Society launched the outcome of the Governance Inquiry at the Society’s Annual Sir Adrian Cadbury Lecture, supported by the George Cadbury Trust and Aston University.
“Many of us here tonight were around when Rodney King, a man who was the victim of police brutality in America in 1992, once challenged us with the question, “Can’t we all just get along?” We, whether Black, White, Jew, Hispanic, Asian have been trying to answer that question to level up to equality – but we are clearly still not there yet; We are at a point in time where we, as a society, are in need of codifying moral, ethical and cultural norms into the framework of how we govern our organisations and it is with that in mind that we will be hearing from Dr Karl George MBE who will be introducing us to the Race Equality Code and the Rt. Hon. Liam Byrne who will be delivering the Sir Adrian Cadbury Lecture discussing the importance of equality in governance.
There have been many momentous periods in history. Some of us are actually at stage in our lives where we have lived through a few. Many of those periods were times of emotional, physical and indeed even spiritual tension. The problems of the world seemed enormous in extent and chaotic in detail. We are now going through, yet another momentous period, in the middle of a pandemic, where we have seen throughout the world a shift in culture in terms of race and ideologies– a moment where it is more important than ever – now – that leaders of organisations make the right decisions; where we must consider accountability for the future.
As such, it was within the spirit of Sir Adrian Cadbury, the father of governance, who in publishing the Cadbury Code of Governance in 1992 (who was a man very much seeking to secure accountability for the future) that the Lunar Society chose to commission a Governance Inquiry from which we have produced a White Paper.
The White Paper, which you will all receive in your inboxes after this meeting was produced further to a Governance Inquiry set up to discuss whether it is possible to have a set of governance principles that are actually fit for future boards and applicable across multiple jurisdictions. Ambitious, I know.
This was done in the context of what is called Governance 3.0 and the 12 Principles of Good Governance published by Dr Karl George MBE of the Governance Forum in association with the Chartered Governance Institute (ICSA). Little did we know, when the Executive Committee of the Lunar Society were in the planning stages with Dr Karl George MBE in December 2020 and securing Dr Abigail Robson of Central Consultancy to conduct the research and write the White Paper that we would be living the future now.
So, tonight is my opportunity first to thank the contributors (some of whom are on the call tonight) without whom the Inquiry would not have been possible and Dr Karl George, MBE (the author of Governance 3.0 and the 12 Governance Principles. I thank also, Sir Michael Lyons, who sadly could not be with us tonight for his illuminating forward and of course, Dr Robson for capturing the views of the respondents so transparently.
So, what was this Governance Inquiry all about? The aim of the Inquiry was to challenge and investigate:
- The impact of the 4th Industrial Revolution and making room for cognitive diversity in its purest sense, including making room for Generations Y and Z, shaping that new generation in governance thinking – after the corporate failures resulting from blind spot and dictatorial governance to move to Governance 3.0 – a more organisationally integrated framework
We also challenged the:
- The assumption that one set of governance principles can be applicable across sectors, sizes of business, maturity of business or geographical jurisdiction.
It was proposed by The Governance Forum (TGF) that this challenge can be met through the adoption of The 12 Principles of Good Governance which would improve organisational outcomes through a comprehensive and flexible approach to governance.
In conducting the research, it was found that many organisations operate with a ‘tick box’ approach to compliance, which presents particularly nuanced challenges. An added challenge is the impact of the 4th Industrial Revolution and how to practically apply good governance principles within this context. Many organisations have found themselves, as a matter of necessity, having to navigate the digitalisation of governance landscape during the COVID pandemic.
This Inquiry also investigated the nature of organisational cultures that boards set and operate within, the aims of The 12 Principles and the attitudes of governance practitioners to the solutions offered by The 12 Principles.
The focus of the Inquiry was on obtaining practitioners’ views on the key opportunities in The 12 Principles and the key challenges involved. The Inquiry was carried out, as a matter of necessity and safety during the COVID pandemic, via online group discussions held as part of a series of seminars with governance practitioners to include from the PWC Middle East Region, ICSA: the Chartered Governance Institute West Midlands Steering Group, ICSA; the Chartered Institute of Housing; Trowers & Hamlin, Joseph Chamberlain Foundation; Birmingham City University; and RSM Birmingham to name but a few.
The principles were tested and the findings were, in a nutshell, that it was agreed that good governance is central to the success of every organisation no matter how small, how complex, where it is based or what it does. Compounding these findings were that these 12 principles encompassing three key areas within the framework – Competencies; Resources; and Execution – make it is easier to ensure that the key principles of what constitutes good governance is more easily and readily available. I have, myself, actively adapted this framework within my organisation to drive board and committee effectiveness and efficiencies…and it works.
One of the nuances arising from the conversations amongst the respondents was the recognition that society and its citizens can benefit from effective and efficient governance mechanisms, but they can equally fall foul of the challenges faced by complicated, sub-optimal, over bureaucratic structures. Greed, nepotism and conflicting motivations have seen catastrophic failures in the private sector which have spilled over into society at large. There are organisations and institutions that are deemed too big to fail, and the governance of these organisations demand sophisticated risk monitoring and assurance gathering to meet the requirements of a rapidly changing environment.
Also, we are in a period where the business landscape is changing dramatically, and technology is providing great opportunities, but it is also disrupting traditional business and governance models which are struggling to keep up. As Baby Boomers retire and Generation X begin to make their mark in the boardroom, it is Generation Y and Z that are the new talent pipeline and indeed, race and gender diversity is also key to engage true diversity of thought. Understanding and recognising that we must make room for them (Generation Y and Z and race including gender) is the biggest challenge since cognitive diversity is becoming business critical.
We learnt from the local authorities represented that many who are juggling housing, education and social care priorities are now having to forge new relationships and collaborations at the same time. Whilst juggling priorities and collaborations with NHS trusts, housing associations or private contractors, local authorities they must still ensure that they continue to provide the best care, accommodation, security to tenants, patients, pupils and members of society to avoid being lost.
So what of the failures in an organisation? Where can those failures normally be traced back to? Governance and leadership. Governance, it is submitted, is not just about adherence to rules and regulations and cannot be designated to a function or a department within an organisation. It is about developing a holistic governance framework through which good culture is a running thread.
One major finding, therefore, was that governance should be integrated across the whole organisation. It is much more than the management of processes, although that is important. It is much more than having systems in place, although once again that is important. Governance is about the systems and controls in place to ensure an organisation is managed efficiently and effectively. It is about the strategic oversight of the Board and their co-existence with the Executive; operational staff; and members within that organisation. It is about the attitudes of Board members, the management of risk, provision of assurance and standards in public life.
What all corporate governance principles do is to set out how organisations can arrange or design themselves (both in terms of structure and process) to make the best decisions possible. That does not mean that if an organisation adopts best corporate governance principles, it is guaranteed to make the best decisions possible, but it should minimise the risk of bad decision-making. It was found that the 12 Principles of Governance build upon that to support organisations to not just go through the motions of following best practice; to maximise efficiencies and effectiveness to support the building of the good culture and attitude of those involved in the decision-making processes.
On a personal note, I found that this exercise emphasised to me and the other respondents how important it is that we can and should learn from different sectors, taking the good practice and using it to improve what we do ensuring that we are responding to the Environmental Social and Governance influences that so many stakeholders, including investors and regulators are insisting upon in relation to our reporting and how we govern our organisations.
Lastly, my sincere thanks once again, to the contributors, Dr Abigail Robson of Central Consultancy, Dr Karl George MBE, Sir Michael Lyons and the George Cadbury Fund.”
Chair, The Lunar Society
October 29, 2020