Why governance policy matters?

Blog located in HR Solutions, Leadership, Small Business posted on April 11, 2018

John Lennon’s assassination; Bernard Madoff Ponzi Scheme; Earl Jones Ponzi Scheme ; Ornge scandals; Former Salvation Army employee charged in alleged $2-million toy theft; Gatineau (Quebec, Canada) daycare shooting; the Boston (United States) marathon explosion; the arrest of men suspected of plotting to attack a Via Rail passenger train in the Greater Toronto Area (Ontario, Canada);  I can go on and on…

What are the causes that allow bad things to happen? Why do we rationalize a bad behavior? Why do good people end up in bad positions?

Barons, Byrne & Suls (1989) define social psychology as “the scientific field that seeks to understand the nature and causes of individual behavior in social situations”.

It therefore looks at human behavior as influenced by other people and the social context in which this occurs.

Social psychologists therefore deal with the factors that lead us to behave in a given way in the presence of others, and look at the conditions under which certain behaviors/actions and feelings occur. Social psychology is to do with the way these feelings, thoughts, beliefs, intentions and goals are constructed and how such psychological factors, in turn, influence our interactions with others.

Think about it. Human behavior is influenced by other human behaviors. This is so powerful!

In fact, individuals need norms. Individuals need social norms and legal norms in order to rationalize their behaviosr.

Why corporate governance policies do matters?

Corporate governance is the way a company governs and polices itself, so that it can avoid being investigated and regulated by outside parties in civil, criminal and federal investigations. Well-drafted and consistently enforced corporate governance policies will result in a cleaner, more ethical organization, appealing to both customers and investors. Failed corporate governance results in massive problems being exposed by whistleblowers, which can result in a PR and legal nightmare, possibly tarnishing your brand beyond repair.

Two main themes should be emphasized by all companies.

Accountability

This refers to the company’s ethical behavior. It refers to setting ethical guidelines for the management, employees, outsourced operations and dealings with the government. These rules should be consistent and strictly enforced.

Transparency

The Enron disaster of 2001 caused many companies to revise their rules of transparency – both operational and financial – to assure investors of the financial health of their operations. Companies should clearly announce and detail all its current operations to investors and the media, and answer all questions regarding controversial business segments. Financial reports should be clear and easy to understand, without creative accounting. Losses should be clearly stated and one-time gains should not be used to pad the bottom line. Forward guidance should be realistic and revised on a timely basis should market conditions change.

Transparency and accountability need each other and can be mutually reinforcing. Together they enable citizens to have a say about issues that matter to them and a chance to influence decision-making and hold those making decisions to account.

Each concept is part of a strategy used for and by citizens to have the means, resources and opportunities to influence decision-making and affect development outcomes.

Simply put, accountability and transparency are norms humans must adhere to in order not to get trapped on the “dark side” of human behaviors.

Most of all, for these norms to be real, the letter “a” must not be left out from “Ornge”. Reinstating the letter “a” is reinstating accountability and transparency.  It’s recognizing the good behaviors and condemning the bad behaviors.

It’s driving society to recognize the bad and be rewarded for it.

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