Leadership and Governance - missing link?

I find it interesting that there appears to be a disconnect between Leadership and Governance. Board members are responsible for governance or the lack thereof, with the elements of governance being delegated down to total ineffectiveness. In effect, governance is being "managed" with no real accountability by the board.

If you bring leadership into the equation, you will agree that it doesn't fit at all!! So why is this? Surely strong leadership should be the cornerstone of good governance?

Historically, weak and ineffective leadership results in the abuse of power and lack of governance. You can witness this in failing economies and companies going under. So where does leadership extend to? Just the Board? I think not. While it is right that the CEO and directors display and practice good leadership, surely shareholders and stakeholders also carry some responsibility?

In all the times where there has been economic crisis's, where were the shareholders? Its OK to reap the profits while the going is good, but you can't tell me that shareholders are oblivious and naive that they do not suspect dirty dealings, especially with the woppers we have been subjected to recently. Its convenient to look the other way!

Perhaps company law should be rewritten to include shareholders or those who manage indirect shareholders money e.g. pension funds etc, in joint responsibility (and liability) for good governance and therefore corporate failure.

Imagine in the current crisis that instead of the State paying out taxpayers funds to prop up companies fraught with mis-management and poor governance, the shareholders were requested to payback all the dividends earned as a result of these actions.

We would see an exponential improvement in good governance, and an active improvement in good leadership. After all, if you as a shareholder were held jointly responsibile for mismanagement, you'd make damn sure that you have the best leadership in place.

Audit - Time to add value

I should have perhaps titled the article - Audit - What Value? In a recent presentation I did on behalf of the South African Chapter of ISACA (Information Systems Audit and Control Association), as is my provocative bent, I challenged the group to review the value proposition offered by the audit function, not only IT, but all the elements of good governance.

Where there is a legislative framework in place that forces companies to use a service, its inevitable that a certain amount of service ethic falls by the wayside (Why should you when companies are forced to use your services anyway?). This in turn effects value delivery. Given that the current global economy is shaky, the focus on cost and value is now suddenly at the top of the board agenda. If good governance was the order of the day, and boards actively practiced their duty of care, this would already be a way of life!

However, back to the point. The days of an audit firm attaching itself like a bloated leech to
a company at year end, and completing the required audited statements in a detached fashion, without actively contributing to the good governance of the entity, are over.

Shareholders and boards should view this kind of activity and behaviour with circumspection and downright suspicion. After all, you pay a fortune for the service, and for what - to rubber stamp? Why not go to the CA down the road and do the same thing at a fraction of the cost? Better still, force your board to instill good governance at source, it will save you a lot in the long term.

This is not a singling out of auditors in anyway. We should apply the same rigour when selecting any vendor or service provider. We should look for value, we should question the return on investment and we should look to it supporting our strategy and sustainability. Above all, we should look for practical solutions that fit our market and culture. Why should we not expect the same from the audit function?

The challenge is for auditors to look inside of their own organisations and develop a value proposition. Why would I look to you as a valued partner? What makes you different and why shouldn't I use the CA down the road?

Shareholders and boards are well advised to rethink their relationships with their partners, and Auditors are no exception.