Organizational governance is so important to modern business practices that it even has its own ISO definition - the international standard on social responsibility, ISO 26000, defines organizational governance as ''a system by which an organization makes and implements decisions in pursuit of its objectives.'' In other words, organizational governance drives the modern organization.
That being the case, organizations need strong and robust entity data on which to base those decisions. Well-governed organizations provide their leaders with good quality information to help them ask the right questions and take the right decisions. That good quality information needs to come from somewhere, and increasingly modern governance is driven by entity and board management software that creates a central repository for governance data, ensuring that there's a single source of truth for those making decisions - both the big strategic ones and the smaller day-to-day operational ones.
But while, yes, leaders need the best information to make the right decisions, they also need to know what they are accountable for. This is a world of increasing legislation around individual accountability in business, and those in senior leadership positions who are making the decisions must understand the role they play in the organization and what is being asked of them, lest they find themselves penalized - or worse, facing a custodial sentence.
You could, then, add to that original ISO definition: organizational governance is the system by which an organization makes and implements decisions in pursuit of its objectives, and the way in which it empowers its leadership to take accountability for those decisions.
The Era of Personal Responsibility for Directors Demands Robust Entity Data
We live in a world of increasing legislation around individual accountability. When signing up for a directorship, an individual is taking on a whole load of director responsibilities, from responsibilities for internal governance, for administration and for a company's activity, through the role they play in transactions, financial difficulties and investigations. If they breach any of those responsibilities, directors are subject to a variety of sanctions depending on the jurisdiction in which the decision was made - note, that's the jurisdiction in which the decision was made, not where the director is based, as this can be an important distinction. For example, in the UK, as in many jurisdictions based on English law, directors must:- Follow the company's constitution and its articles of association
- Act in the company's best interests to promote its success
- Use independent judgment to make decisions
- Exercise reasonable care, skill and diligence
- Avoid conflicts of interest
- Not accept benefits from a third party that are offered because of their position
- Inform the board if the director may personally benefit from a transaction the company makes