Gover­nance

Element - - Business -

The gover­nance of a so­cial en­ter­prise or con­scious busi­ness re­quires the same com­mer­cial acu­men and busi­ness savvy as a reg­u­lar en­ter­prise, be­cause it is run on the same prin­ci­ples. Where it dif­fers, how­ever, is the ex­pec­ta­tions of the board in terms of re­sults.

“Gover­nance is key for so­cial en­ter­prises,” says Henri Eliot, CEO of Board Dy­nam­ics in Auck­land. “The board is re­spon­si­ble for es­tab­lish­ing the strate­gic and eth­i­cal di­rec­tions of the com­pany. It re­cruits, com­pen­sates and eval­u­ates the CEO and es­tab­lishes a suc­ces­sion plan for se­nior man­age­ment. The board is also re­spon­si­ble for the over­sight of risk man­age­ment, in­ter­nal con­trol and cor­po­rate com­mu­ni­ca­tions.”

Eliot says that meet­ing th­ese re­spon­si­bil­i­ties re­quires the board to have an effective sys­tem of gover­nance and to re­cruit di­rec­tors who will work well to­gether to meet the ex­pec­ta­tions of the own­ers, leg­is­la­tors and reg­u­la­tors. “They need to work as a team but there should also be a cre­ative and healthy tension that comes from the ‘con­struc­tive in­ter­ac­tion’ of peo­ple with dif­fer­ent back­grounds.”

Eliot says that so­cial en­ter­prises of­ten re­cruit board mem­bers based on per­sonal re­la­tion­ships. Tra­di­tion­ally the pri­mary sources for board mem­bers have been the per­sonal con­tacts of the CEO, chair, other board mem­bers and se­nior man­age­ment.

“To over­come this short­com­ing, or­gan­i­sa­tions should as­sess the skills cur­rently needed over the next three years. Boards should ac­tively seek out com­pe­tent, qual­i­fied in­di­vid­u­als who can help them un­der­stand di­verse view­points from a wide cross sec­tion of the com­mu­nity.”

Eliot says it is crit­i­cally im­por­tant for board mem­bers and man­age­ment to be clear about their re­spec­tive roles be­cause they di­rectly af­fect their ac­tiv­i­ties and re­la­tion­ships. “The board should de­ter­mine how en­gaged it should be in the com­pany’s des­tiny. This will de­fine what kind of di­rec­tors should serve and their de­gree of com­mit­ment and en­gage­ment.”

Henri Eliot, CEO of Board Dy­nam­ics.

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