Mature governance – the No. 1 issue of our time

AOM 2015 1.1

How many times might you expect to experience a complete shift in thinking about how society should be run?

History tells us, at least at a national level, that these matters have usually been resolved only after violent struggles. The destiny of democracy in the UK was only forged after King John was forced to sign the Magna Carta ; in France the cry of  “Liberté, égalité, fraternité” saw terrible blood-letting; in the US the American Constitution had a difficult birth.  All of the governance structures that we see today are still anchored in the enlightened philosophies that lay behind such tumultuous events.

Those of us fortunate enough to have grown up in the relatively peaceful and prosperous societies that they produced may need reminding that the reason they have survived this far is probably because they all contain elements of universal truths about how we must live together. One of those truths is that the governed have to trust those who govern. Good, effective governance is a combination of societal motive and leadership capability and recent events have clearly demonstrated  that insufficient attention has been paid to these essential features; only this time it is on a global scale.

The economic growth that capitalist economies achieved encouraged a rather laissez faire attitude to corporate governance, until the banking crisis of 2008. It came to be known as the Global Financial Crisis because the world finally woke up to the fact that everyone on the planet is a player in a whole system of interdependencies.  This is why the annual meeting of the Academy of Management (AOM – 7th -11th August) has chosen governance as its theme because its vision is that all –

“Organizations operating under all kinds of governance structures – including companies, non-governmental organizations, hospitals, schools, and governments – will be pressed over the next generation to make better decisions; respond more quickly to information; coordinate better; disseminate important information faster; waste less; operate more cleanly and fairly; cultivate trust through transparency; and mobilize expertise more efficiently.”

Now could it be just a coincidence that in May this year Andrew Haldane, Chief Economist at the Bank of England, had the audacity to make a speech to the Corporate Finance Conference entitled “Who owns a company?”  In it he questions whether the owners and shareholders of a company should have primacy in running it and presents a very convincing case to support his contention that –

“… despite its durability and success, across countries and across time, this corporate model has not gone unquestioned. Recently, these questions have come thick and fast, with a rising tide of criticism of companies’ behaviour, from excessive executive remuneration, to unethical practices, to monopoly or oligopoly powers, to short-termism. These concerns appear to be both strongly-felt and widely-held.”

Could it be even more of a coincidence that the Maturity Institute is only in its third year and yet receiving great interest from City finance and investment communities who need much more transparent and effective reporting on human capital risk and value creation?

No, this is not a time of coincidences, we have arrived at another point in human history where tumultuous events are starting to happen.  Society reaches a point where it questions its own legitimacy in response to global changes.  We tend to put up with so much, while we cling to the apparent peace and safety of the past, but eventually reality dawns that the essential elements of a sustainable society are no longer there and the time for change has come.  AOM, Andrew Haldane and MI are all coalescing around the same agenda. It always was and always will be about human behaviour at the highest levels and we will only assure the behaviour we need if we have societally driven, capable governance. For the Maturity Institute, societal value is our motive and developing human capability is our goal.

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