The Need for a Global Governance Standard

Summary
The current global economic crisis is a failure of past and present governance systems. In response, we are introducing a new approach to governance designed to fulfill its fundamental purpose. This principle-based approach to corporate governance may serve as the foundation for a globally recognized standard for this vital discipline.

Article
In October of 2008, Carl Icahn charged that boards aren’t doing their jobs. Warren Buffett in effect said the same thing in 2003. And in 1976, Peter Drucker said the board of directors has failed as an institution in nearly every major fiasco over the last 50 years. Having been deeply involved in board education and corporate governance over the last 5 years, I can see why: There is far too little discipline and science applied to this critical function. Governance needs to be governed, and the role of the board needs to be transformed.

In response to this unmet need, we are introducing to the global business community a new approach to corporate governance designed to fulfill its most fundamental purpose: Assuring long-term success for the firm and all of its stakeholders through alignment of their interests and efforts. Created at the systems level of thought and action, this principle-based, strategic approach to corporate governance is intended to serve as the foundation for the establishment of a globally recognized standard for this vital business discipline.

We believe the key to success is a synthesis of the agency and stewardship approaches to corporate governance integrating governance, strategy, risk, and corporate social responsibility. Further, governance must be practiced in a performance-based context as a powerful enabler of the strategic management process, increasing interdependence between the board and management on behalf of the firm’s stakeholders.

This combination of experience, discipline, and science has enabled us to create our firm’s top ten principles of strategic governance:

1. The Purpose of Governance
2. The Purpose of Strategy
3. The Essence of Risk
4. The Relationship Between Governance, Strategy, and Risk
5. The Relationship Between Boards, Governance and Shareholders
6. The Relationship Between Boards, Management, and Shareholders
7. The Relationship Between Boards, Strategy, and Culture
8. The Relationship Between Boards, Management, and Strategy
9. The Purpose of Culture
10. The Relationship Between Organizational Design and Strategy

While this system of principles should be considered as fundamental, we expect it will require additions and perhaps slight modifications depending on the country or geographic region in question. However, these principles are all integral parts of a holistic approach to corporate governance proven to cause business success under vast amounts of varying business conditions, and should generally be viewed as universally effective in their application.


Biography of Author: Mark W. Sickles, an adviser to corporate directors and officers, is founding principal of Mark W. Sickles, LLC. He is author of Shareholder Value Assurance-The Cure for Enronitis and numerous articles published by Directors Monthly, Directors & Boards Magazine, and Investor Relations Update. Mark has served as an adjunct professor and faculty member at The Singapore Institute of Management, American Management Association, and Rutgers University. He currently serves on advisory boards of Inside the Boardroom at Drexel University’s Lebow College of Business, Trestle Group, and The Rothman Institute of Entrepreneurial Studies.


Contact Information:

Email: mark@nacdnj.org

Address:
Mark W. Sickles, LLC
PO Box 91
Brielle, NJ 08720, USA
C: 1-201-315-3653