Confusion of Babylonian proportions…..
Following the release of the Cadbury Report in the UK and shortly afterwards the first King Report in South Africa in the early nineties, a wave of corporate governance codes and reports followed. This resulted in more than 140 of the approximately 193 countries in the world today having some form of corporate governance code by 2019. At the southern tip of Africa, Lesotho is one of the most recent countries to adopt its own code, the Mohlomi Corporate Governance Code, named after its well-known traditional Leader Chief Mohlomi who lived around 1720 to 1815 and is often referred to by the people of Lesotho as one of history’s great ethical and moral leaders of all time in southern Africa.
A review of the many global corporate governance codes will identify a few common themes and principles but also very diverge approaches and recommended practices. This could make it complicated to adequately assess and judge the governance performance of organisations across border. Not to mention the real possibility of misunderstandings and misalignment when trying to interpret the corporate governance language of other counties. Considering the ‘global village’ market where many organisations find themselves trading and operating, the potential for Babylonian confusion is thus very real.
ISO to the rescue….
Thanks to the International Organization for Standardization, or ISO for short, there may be a light at the end of the dark tunnel. ISO (derived from the Greek word ‘isos’ which means equal) celebrated its 75th birthday earlier this year and with its central secretariat based in Geneva it has been responsible for the publication of more than 24 250 international standards. These standards address a wide variety of topics that range from items such as energy and heat transfer engineering, shipbuilding and space vehicle engineering and wood technology to metallurgy, military affairs and sport, to name but a few. With its membership of 167 national standards bodies, it can truly be said that ISO has an international footprint.
Birthing a global corporate governance language…..
With the benefit of its international reach, ISO established Technical Committee 309 (ISO/TC 309), Governance of Organizations, in 2016 to address “standardization in the field of governance relating to aspects of direction, control and accountability of organizations”.[1] In September 2021, ISO/TC 309 released ISO 37000 Governance of organizations – Guidance, the first ever international benchmark for good governance or, as Dr Victoria Hurth, Co-Convener of ISO/TC 309, explained ‘the first ever global consensus standard on governance’.[2] Considering that individuals and organisations representing more than 70 countries were involved in the group of experts developing the standards and that the final draft of ISO 37000 was unanimously approved when it went to ballot among the 164 ISO members, the reference to ‘global consensus’ can hardly be disputed.
It’s all about purpose and sustainability…..
With purpose and sustainability at the heart of ISO 37000, its aim is to provide organisations and their governing bodies with the tools they need to govern well, enabling them to perform effectively while at the same time behaving ethically and responsibly. Its outcomes, principles and key aspects of practices are aimed at all kinds of organisations, regardless of size, type, or location.
ISO 37000 defines governance as a human-based system by which an organisation is directed, overseen and held accountable for achieving its defined purpose in an ethical and responsible manner.[3] Taking a cue from corporate governance codes such as the King IV Report on Corporate Governance for South Africa, 2016[4], ISO 37000 can also be said to be outcomes based as opposed to rules based. It defines organisational outcomes of good governance as being effective performance, responsible stewardship and ethical behaviour.
With principles and key aspects of practices to guide the way…..
The enabling role of the application of specific principles that help the organisation fulfils its organisational purpose in a way that generates value for both the organisation and its stakeholders is duly recognised. These principles are categorised as primary, foundational and enabling principles. The intention is for all principles to be applied and to be applied concurrently.[5] The rationale for each principle is given with key aspects of practice providing further guidance to the reader on the practical implications and expectations.
So, what are your waiting for…….
ISO 37000 does not introduce new regulations. The ultimately objective is to provide corporate governance guidance with a universal perspective. As more eloquently explained in the introduction of ISO 37000:
“When organizations use this document stakeholders across countries and sectors can have increased confidence that the governing bodies of these organizations are responsible, accountable, fair and transparent, they act with probity and make decisions which are risk-based….”
While organisations cannot be ISO 37000 certified, corporate governance practitioners can, and should, obtain the necessary insight and understanding to not only ‘speak the language’ but to also ‘walk the talk’. A win-win scenario with the potential benefits as quoted above for the organisation and a simultaneous strengthening of the profile of the practitioner. But it is not only for corporate governance practitioners. All those finding themselves in the boardrooms of organisations anywhere in the world, whether in private or public sector, will benefit greatly from ‘learning a new language’.
[1] https://committee.iso.org/home/tc309
[2] https://committee.iso.org/ISO_37000_Governance_published
[3] ISO 37000, Governance of organizations – Guidance, 2021, page 6
[4] King IV™ – Trademark owned by the Institute of Directors of South Africa
[5] ISO 37000, Governance of organizations – Guidance, 2021, page 11
Become a certified ISO 37000 practitioner here. Contact the FluidRock Academy team today on trainme@fluidrockgovernance.com and let us help you broaden your skills set! Get more information about our FluidRock courses here or book through our website
