Governance vs Management

What is clear is that governance has little to do with management although this often comes as a surprise to directors. It is not a hands-on activity that can be learned then put into action easily. It is a whole-board activity and not something that can be delegated to the company secretary or the chairperson only. Whilst it will always be helpful to consider the views of a number of commentators and of the issues arising within the current governance debate, the real location for the creation of good governance is the boardroom and within each and every board member who is on it.

Whilst management operates within a hierarchy of delegated responsibility and authority, the members of a board are all jointly and individually responsible with equal rights and duties. Bob Tricker, a well known commentator on governance, depicts the board as a circle superimposed on the pyramid of hierarchical management. The board is concerned with governance and the management organization with managing. Some of the senior management at the top of the hierarchy will also sit on the board. This is the reason the system of governance in the United Kingdom is called the 'unitary' board system rather than the European, 'two-tier' board system or 'supervisory' board where the board is completely separate from the management hierarchy.

The practice of governing is certainly different from managing: It is not about managing companies but ensuring they are well run. It is less about doing and taking action than reflecting and learning. The key principles are that of prudence, acting in good faith, stewardship, duty, openness, transparency and integrity. These are the real building-blocks of excellence in corporate governance and the binding actions for an effective board.