Governance has struggled to keep pace with today’s business landscape. The world we live in is switched on, digital and decentralized. Cyberattacks can originate from anywhere in the world, while social media amplifies the voice of every customer and employee. Activists, armed with real-time data, are challenging company strategy and competencies. Globalization is introducing layers of regulatory and ethical complexity. In a world where nanoseconds count, old governance practices aren’t just out of date; they’re exposing today’s organizations to the kinds of risks that can lead to crises. And there’s no shortage of examples these days…
Cyber breaches. Sexual harassment cases. Regulatory mishaps. Flawed corporate cultures. These are the things that governance shortfalls are made of. And the next question is always the same: “Where was the board and leadership team while all this was happening?”
According to a May 2019 Diligent Institute report, recent “governance mishaps” occurring at 14 companies have cost shareholders $490 billion in value when measured one year later. Yet, the same report also delivers an important silver lining—namely, that companies with strong governance (top 20%) outperformed the bottom 20% by 17 points or 15% over a two-year period.
Simply put, good governance is a competitive advantage in today’s complex, digital world. And the first step towards modernizing governance frameworks requires clear identification of the problem.
Acknowledging the Governance Deficit
Governance is more or less a historical concept, and our current frameworks are backwards-looking in a time when we need them to be forward-thinking.
— Board Member Anastassia Lauterbach in Governance in the Digital Age
Globalization, digitization, connectivity, access—many of these change factors have been welcomed advancements, yet the rate at which they’ve come into play has left today’s organizations with little time to adapt. As a result, today’s organizations have been exposed to a dangerous governance deficit, which can take many forms:
- Leaders don’t have the right information at the right time to ask the right questions.
- The board lacks visibility into the company, across the industry, and into the future.
- Organizational data and communication systems are disparate and unsecure, hindering collaboration and exposing its users to potential cyber risk.
Core to today’s governance deficit is a lack of visibility, security and speed. When companies and boards address these deficiencies, they empower effective decision-making, enhance transparency, and gain access to the kinds of insights that drive growth and longevity in today’s digital age.
Defining Modern Governance
Modern governance: (n.) the practice of empowering leaders with the technology, insights and processes required to fuel good governance.
In an effort to bridge the current governance deficits, Diligent is thrilled to be launching a new product category: modern governance. Enabling this new category, Diligent has launched a unique set of product offerings that put the necessary tools and intelligence at a board member’s fingertips.
Modern governance equips boards with the information they need to ask questions and address red flags. It protects an organization’s most important data. It enables transparency and liberates the flow of information. It transforms the board into an engaged partner and a radar on the future. Most importantly, modern governance is a competitive advantage in a time of enhanced risk and disruption.
What does a modern governance product solution look like? Reputation monitoring. Committee-level data. Predictive analytics on shareholder actions. Candidate search. Secure document sharing and collaboration tools. Integrated entity management. All these tools (and more) now integrate seamlessly within Diligent’s foundational board management product offering, which is trusted by more companies across the world than any other board service provider.
Motivating this modern governance category launch is our genuine belief that good governance matters and impacts us all. Every employee, customer, community and shareholder is affected by the way companies govern, good or bad. Given Diligent’s customer base (i.e., 50% of Fortune 1000 companies, 70% of the FTSE 100, and 70% of the ASX 100, customers in 90+ countries around the world), we recognize our impact in the governance equation. Not only are we equipping today’s boards and companies with the tools they need to thrive, but with the tools they need to do the right thing.
Our aspiration at Diligent is to play a very active role in modernizing governance. That [role] would be listening to our clients (directors, corporate secretaries, general counsels, CEOs) to provide tools that allow companies to move faster and…technology that helps us better deliberate at improved speeds. Our aspiration is to help to power modern governance.
— Brian Stafford, Diligent CEO via The Corporate Director Podcast
Over the next several weeks and beyond, we’ll be exploring the impact of good governance, sharing best practices, and celebrating the companies, board members and professionals who are doing it well.