A while back we discussed a little about problems afflicting management in the co-operatives societies and how improvements can be made. Later on, I thought it all boils down to the low regard we have for corporate governance in our managerial practice.
Every organization you can think of has to have sound corporate governance principles if the set objectives are to be achieved.
I have had opportunity to work in both profit making and not for profit organizations and concluded that the governance thereof is nothing to sing about. The people and money problems you encounter managing a bar are exactly the same you encounter managing a church.
What, then, is the role of corporate governance?
Specific roles include minimizing risk, adherence to strategic objectives, minimizing potential conflicts of interest, enforcing accountability within senior management, provision of accurate & timely reporting as well as encouraging proactive participation of organizational stakeholders.
Practically all goals we seek to achieve involve taking risks. There then arises the need to strike a balance between the benefits of the goal to be achieved and the attendant risks. The highest level of management will determine the organization’s risk appetite, set out the policies & procedures to be followed before delegating implementation to the work force.
In the grind of day to day life, it is very easy to lose focus and end up doing something different from what had been planned. Well practiced governance will keep everyone in the straitjacket of set goals to make sure all our energies are channeled in the correct way.
The working assumption on minimizing conflicts of interest is that the people in senior management have no vested interests and will steer the wheel with common good in mind. That hardly happens.
I remember an incident where I was part of a team tasked by my church to implement a project. Our role was to draw a budget, raise funds and deliver the project. After our first meeting, we made a number of decisions that in our opinion, would deliver at minimal cost and within reasonable timelines. The following Sunday, we were all surprised to find the project halfway done by people we had concerns about their efficiency and bigger bill to meet.
Do profit making organizations fare any better?
The only reason we know the CMC motors saga is because it leaked to the media. Insiders in many of the corporate organizations whisper their scandals in hushed tones because it is the order of the day. Many people seeking positions of influence do so to enrich themselves by doing business with the organizations without competitive bidding. I don’t know how procurement works elsewhere but in Kenya, we may need angels to clean up!
While it is always very clear who holds junior staff accountable, senior managers can easily abuse their discretion if no framework exists to hold them accountable. In large businesses, senior management and the Board of Directors are held accountable by regulatory authorities and shareholders. A good governance policy spells the procedures top management should follow in their day to day work. Then again, a lot of things should happen, but rarely do.