The term “corporate governance”. Where does it come from?
Bob Tricker of The Corporate Policy Group says in his book Corporate Governance: Principles, Policies, and Practices that “50 Years ago we knew remarkably little about the reality of board-level behaviour. Many ideas are now being discussed around the world – improving strategic decision-making, alternative board structures and committees, new roles for outside non-executive directors, audit committees, supervisory boards, regulation, accountability, industrial democracy, wider disclosure, accounting standards, and so on.”
This publication for the first time coined the phrase ‘corporate governance’.
The main arguments discussed in the book are:
- firstly, that there were many opportunities to improve performance and effectiveness, and
- secondly, the way many business entities operate in society no longer reflected the underlying nineteenth-century legal model of the corporation, and
consequently, there was a need to rethink the underlying conceptual framework.
Board level activities are probably the same at the top of many organizations. It’s not management. It involves the exercise of power. It is a personal and political process. It does differ from what management does.
Governance at board level involves formulating strategy, setting policy, supervising management, and being accountable overall. Management runs the enterprise, but the governing body ensures that it is being run well and in the right direction.