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The seesaw of the governance: getting the balance right

The increased demand by institutional investors and regulators that corporate directors focus on compliance and internal auditing appears to be driven by a motivation to right the wrongs of the past rather than to create rights in the future. Managing by looking in the rear view mirror is a poor use of corporate strategy and is not supported by our research which shows that shareholders wish their directors to spend time on forward-looking strategy tasks more than on auditing. We believe the focus on compliance management may come at the expense of providing long term vision, sound strategic planning and competent leadership from the boardroom. An over-emphasis on compliance issues introduces the risk that directors spend more time and effort investigating the actions of senior executives and becoming absorbed in operational matters. This means that boards become caught up in micro-management rather than debating and formulating long term strategic plans and providing appropriate stewardship to the organization and support to the CEO and senior executives. Requirements for short term reporting exacerbate the problem by driving board executives to rely more on financial results rather than securing the viability of the organization over the long term. Whilst the increased attention to governance issues is aimed at protecting shareholders, we argue it is likely that shareholders are being exposed to even greater future risks given the limited time being spent on long term planning and strategic change. This paper explores the concept of a balance point where directors effort needs to be appropriately focused on both governance issues and providing leadership from the boardroom. It also discusses some of the leadership attributes and roles of executives in long term high performing organizations in Australasia and explores how these attributes impact positively on organizational excellence and sustainability.
Journal Article
Type of thesis
Mueller, J., Cocks, G., & Ingley, C. (2009). The seesaw of the governance: getting the balance right. International Journal of Business Strategy, 9(1), 137-146.
International Academy of Business and Economics
This article has been published in the International Journal of Business Strategy. Used with permission.