Corporate governance is currently front and center as companies like Equifax, Wells Fargo and Uber suffer crises in these areas after board oversight and risk mitigation troubles.
“At Equifax, good corporate governance is a way of life,” the company says in its corporate statement.
This was before the credit monitoring firm suffered a massive cyberbreach it is still seeing fallout from.
And “this kind of rhetoric is much too common at companies,” said John Trentacoste, partner at Farient Advisors, a corporate governance advisory firm. “It’s much harder to live that value and practice it.” He expects companies to begin taking a harder look at their corporate governance policies through advisory boards.
There is no single definition for corporate governance, but generally it is thought of as being how the organization is managed and conducts itself from the top down.
Creating and keeping strong corporate governance is no small task. Experts say it involves a thorough evaluation of the company’s top executives and board, including diversity and tenure; a look at the company’s culture; an independent review of operations; a strong succession planning program; and always watching the latest labor and employment laws.
“You need a clear structure,” said Micah Alpern, principal at A.T. Kearney, a global consulting firm. “Without that the organization is disorganized.”
Companies with good corporate governance are less inclined to “let things happen in the market or internally waylay them,” Alpern said.
“They hold themselves to a higher level,” said Phil Rowley, executive director at Berkeley Research Group.
In his opinion, companies with good corporate governance include PepsiCo for its commitment to customers, Salesforce.com for its solid leadership and Deloitte, which he says is on top of the evolving role of work.
“They say let’s frame who we want to be and how we will conduct ourselves in collaboration between the CEO and the board,” Rowley said. “They say, ‘To be good, we have to be effective at listening and questioning.’”