What is governance?
There is no one universal system of governance. Instead, governance principles are supported by laws and regulations and are used by organisations to define how the board and management should operate.
Governance is a system that provides a framework for managing organisations. It identifies who can make decisions, who has the authority to act on behalf of the organisation and who is accountable for how an organisation and its people behave and perform.
Governance enables the management team and the board to run organisations legally, ethically, sustainably, and successfully, for the benefit of stakeholders, including shareholders, staff, clients and customers, and for the good of wider society.
Good governance is one way organisations in all sectors achieve their purpose. It is equally essential whether that purpose is commercial, charitable, or to provide public services.
Organisations that have good governance use clear decision-making processes, behave openly by reporting on their activities, actively engage with their stakeholders, effectively manage the risks they face, and take responsibility for controlling and protecting their assets, including their reputation. Each of these areas of governance activity contributes to an organisation’s success.
We also increasingly expect organisations to uphold high ethical standards, be good employers and be mindful of their environmental impact. Governance supports the setting of these organisational standards and maintains the board's focus and the management team in delivering them.
Who is responsible for governance?
Governance is a necessary part of how organisations of all sizes operate, from huge multinational companies to small local charities. In larger organisations, effective governance is shared between the governance professional, the board and the executive management team.
The governance professional
In large and medium-size organisations, governance is often led and supported by governance professionals who are trained experts in governance principles and practice and skilled at working with others. Public companies are required by law to have a company secretary to shape and support governance. A company secretary (or group company secretary if the organisation is made up of a group of companies) may have several governance specialists working for them in a team that’s called the secretariat or governance team.
Smaller organisations must also meet governance requirements with fewer resources. To do this, some choose to add the governance responsibilities to another role, such as finance, operations or HR, with appropriate training and support.
The company secretary
Company secretary is the traditional job title for a governance professional. The title dates from the mid-nineteenth century to describe the senior corporate administrator when the modern structures for companies were created. Today, whilst the title is still widely used, what company secretaries do and the responsibilities they have are far more significant and wide-ranging than company administration.
Company secretaries also work in charity, public and not-for-profit organisations as well as in the corporate sector. Today the job titles for governance professionals increasingly vary across different organisations and, in addition to company secretary, can include chief governance officer, head of governance or governance manager.
In the public sector, local authorities, schools and colleges are required to employ a governance professional in the role of clerk to support their boards. NHS Trusts typically employ professionals to lead governance, the most senior of which may be in positions such as heads or directors of governance or known as the trust secretary.
For simplicity, throughout our discovery area, we refer to the role of governance professional as its the broadest and most inclusive term. These references encompass company secretaries as well-established and highly regarded governance professionals.
Who do governance professionals work with?
Governance professionals work closely with the board of directors (or charity trustees in the charity sector or governors in an educational setting), and establish an effective system of governance with the executive management team.
The board is the principal decision-making body of an organisation. The board's non-executive directors, trustees, or governors take decisions about the organisation's strategic direction and have oversight of its activities.
These responsibilities are set by law and in the organisation's governing document, such as its Articles of Association or Constitution. Whilst the law sets the framework for director, trustee and governor duties and responsibilities, the governing document provides more detail on the organisation’s core purpose, the specific authority of the board and how the board is accountable to others.
The board is the responsibility of the chair. The chair's role is to provide the leadership that enables the board to be effective as the organisation's highest decision-making body. This is not just achieved through directing the flow and focus of the meetings but also building relationships and undertaking the preparations that create the conditions under which the directors can have productive group discussions. To do this, the chair has a close working relationship with the governance professional, who often reports into them on governance matters.
The governance professional may also have another reporting line to the CEO or organisational leader for executive functions.
The executive team
The executive team are the senior employees responsible for making the organisation work by developing strategy and delivering services in line with the board's direction and requirements. The executive is led by the chief executive, supported by executive directors in areas such as finance, operations, sales and technology.
The governance professional has a close working relationship with both the chief executive and the chair and their teams. Sometimes the governance professional acts as the bridge between the two leadership teams, ensuring that each fully understands the other's needs and requirements.
An essential part of the governance professional’s role is to support the chair in ensuring that the board and its decision making is effective. This involves a wide range of activities from setting the annual meetings calendar, preparing agendas and commissioning papers, documenting the decisions made at the meetings in minutes, ensuring that actions are understood and completed within the organisation, and public reporting and notifications to regulators is done.
Governance professionals also provide advice on law, regulation and governance matters concerning the board’s activity and undertake the recruitment and development of new board members.
The role of the governance professional
This unique role played by governance professionals often puts them at the centre of important events. In the private sector, this can include handling an initial public offering, overseeing a corporate merger, or raising capital. In the public sector, governance professionals may be integral to expansion, mergers, diversification and dissolution. Governance professionals’ support for the board also becomes even more critical at times of crisis and change. The governance professional acts as organisational memory, ensuring compliance, maintaining ethical considerations, and advising on solutions. This breadth and variety means that governance professionals often find that no two days are the same and have huge scope for personal and professional development across their careers.
Typical governance areas
Governance professionals will typically advise and support the board in the areas such as:
- legal and regulatory changes
- financial and strategic reporting
- environmental impact assessment and reporting
- risk management and reporting
- stakeholder engagement
- board diversity
- succession planning
- boardroom dynamics and board effectiveness
- organisational culture
- recruitment and induction of directors
Typical governance activities
Governance professionals will undertake a variety of different activities across the year, which include:
- organising and supporting board and committee meetings
- ensuring that information flows securely to the right people
- keeping proper records of board decisions so action can be taken
- preparing the annual report and organising the AGM
- ensuring organisations meet all legal and regulatory requirements
- supporting the chair in developing the effectiveness of the board
- researching new topics and emerging trends
- advising the chair, board and the executive on governance matters
- recruiting and on-boarding new directors, trustees or governors
- running projects which turn board decisions into action