What Is Corporate Governance, and Why Does It Matter?

Picture of Carrie Beckner
Principal, Dallas Office

The phrase “corporate governance” might conjure images of mind-numbing meetings, but drafting a corporate governance structure is more like telling a story.

In fact, it’s one of the most important stories your company will ever tell.

Corporate governance includes the regulations, systems, and organizational nuances that provide direction for a company. It can be an abstract concept, but it represents structure and guidance. Many factors — from bylaws and organizational charts to board decisions and work-life balance policies — falls into the purview of corporate governance.

A company’s corporate governance is essential because it informs employees at all levels what their organization stands for and how it operates — and that understanding is vital to a successful workplace. Slack’s “State of Work“ report shows that, without a clear grasp of the company’s strategy, only 22% of workers feel aligned with their employers. Besides this, only 33% know how their work helps move the company forward.

You can’t afford to lose alignment at any time, but such a loss is particularly damaging during moments of change or challenge. Without cross-team buy-in, cracks begin to form. Soon, your employees don’t know what, why, or how they’re contributing.

Why Getting Buy-In Ensures Good Corporate Governance

“Alignment” itself is somewhat a corporate word. In practice, though, it just means that everyone shares goals and speaks the same language. 

Alignment has been linked to heightened employee engagement, which is clearly vital in any workplace. Only 33% of U.S. workers report feeling engaged, according to Gallup’s “State of the American Workplace.” Higher engagement results in 41% less absenteeism, much less turnover, and 21% higher profits. It’s pretty much a win for everyone. 

Obviously, it’s worthwhile to make sure everyone buys into your company’s mission and how you plan to get there, which is where corporate governance comes into play. Corporate governance addresses so many people, from senior executives to managers to frontline employees, which means telling that story with clarity and purpose is a stellar way to achieve buy-in and overall alignment.

Here are three steps you can take to gain buy-in and ensure good corporate governance.

1. Start from a receptive place.

To make good corporate governance a reality, you need to lead from a place of hope and open-mindedness. If C-suite leaders enter a governance conversation with skepticism, then all other employees will lose energy and enthusiasm, too.

2. Devise a structure that tells a story.

When you’re trying to work out a governance structure, people often get stuck wondering whom they should approach with specific problems and who’s accountable for what.

At Pariveda, for instance, good corporate governance structure doesn’t just mean relying on the word Holacracy, which results in the governance structure we use. It means painting a picture for our employees about how that structure will function on a day-to-day basis.

What does this look like? Well, it’s not just an org chart updated in real time (although that’s a step in the right direction) but rather a combination of emails, Slack posts, published letters, and small-team announcements about how work might change as a result of structure updates. When we added a new board member, we sent out an email that announced the change, introduced the person (as a person), and reminded the firm what our board’s role is in general. Once you decide on structure, work to determine the best communication and processes that support updating others fully, quickly, and transparently.

3. Balance hard rules with experimentation.

Good corporate governance helps eliminate confusion and doubt around how your business works. But that shouldn’t mean stifling your team with rules. You can start by figuring out what the firm guidelines are. Then, teach and train so that people know the boundaries they’re working with. Finally, set your people free and let them get creative in their roles.

When you think about the effects of bad corporate governance, getting companywide buy-in on your structure becomes more important than ever. Without a clear story, your company will aimlessly drift. Take the time and effort to craft the narrative of governance strategy so you can go forward as a united voice, regardless of the changes you tackle next. 

Picture of Carrie Beckner

About the Author

Carrie Beckner has a passion for people and problem solving that has helped her lead at Pariveda in myriad roles. Her ability to adapt and meet the needs of others has brought her from Office Manager of Pariveda’s largest office, Dallas, to aiding in the implementation of Holacracy, and education on Polarity Thinking across the entire firm. 

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