CORPORATE GOVERNANCE – IMPLEMENTING SYSTEMS
By Steve Simmonds
 
Governance is a new focus for businesses today. In response to a wave of corporate scandals, new laws have been or are being developed to encourage companies to "do the right thing." This is a complex area with the potential for substantial impacts for quality, environmental, safety and health programs.
 
Quality, environmental health and safety issues can have substantial impact on a company's financial performance. Companies who have failed to manage their SHEQ issues have incurred multi-million rand liabilities, faced significant erosion of their business reputation or gone bankrupt when they failed to anticipate the importance of an emerging issue.
 
Why is Corporate Governance Important?
 
There are four drivers that have focused increased attention on Corporate Governance:
 
Corporate Accountability Laws - Laws are now focusing new attention on the internal controls companies have in place to ensure sound fiscal management and accurate financial reporting.
 
Trade Globalization - The development of a global marketplace means companies have to be concerned about regulatory requirements wherever they plan to market their products and services.
 
Reputational Risk - A survey of the members of the World Economic Forum found that over half of the survey respondents estimated that corporate brand or reputation represents more than 40% of a company's market capitalization. Given the public interest in environmental issues in particular, negative environmental publicity impacting a company's reputation is a significant corporate concern.
 
Expanding Potential Liability - Increasingly, laws and standards are shifting from "buyer beware" to a focus on minimizing a product's potentially harmful quality, environmental and safety impacts throughout all aspects of its life-cycle. This has lead to an increased focus on those entities along the product distribution chain that have the ability, or means, to prevent potential harmful impacts. With a global marketplace, this also means that ignoring quality, safety and environmental issues may create significant world-wide liability.
 
Seven Key Requirements for Effective SHEQ Corporate Governance
 
1. Top Management Involvement
 
Studies of SHEQ programs unanimously conclude that effective SHEQ performance "starts at the top." Informed, involved and committed top management is critical to effective SHEQ performance.
 
2. Defined Roles & Responsibilities
 
SHEQ programs are only effective when there is ownership. This only happens when roles and responsibilities for SHEQ performance are clearly defined and individual performance reviews include an evaluation of how well SHEQ responsibilities have been met.
 
3. Appropriate & Consistent Metrics
 
It is impossible to proactively manage processes if you don't know where you are, where you are going or how far along you are toward meeting your goals. The development and on-going monitoring of clear, concise and relevant performance metrics is critical to effective SHEQ performance. For organizations with multiple business units, it is also critical that these metrics provide consistent data reporting to support sound decision-making.
 
4. Impartial Evaluations by Competent Assessors
 
Human nature being what it is, it is difficult for those who are involved in implementing and maintaining systems to provide an impartial evaluation of the system's performance. In addition, system audits require competent auditors.
 
5. Effective Communication
 
Management requires timely and effective communication. Responsibilities will be unfulfilled if they are not communicated. Metrics are meaningless unless they are available when decisions need to be made. Evaluation serves no purpose unless it drives system improvements.
 
6. Availability of Required Resources
 
Good intentions are wonderful but quality and safety initiatives and environmental protection requires resources - money, manpower and corporate support.
 
7. Consideration of Sustainability & Social Responsibility
 
In today's global marketplace, country-specific laws and regulations can no longer be the exclusive focus of SHEQ programs. Laws will never address all aspects of what is fair, ethical and consistent with company values. Rather than ignoring questions of ethics and values, increasingly companies need to confront these questions directly and proactively.

Steve Simmonds
Executive Head: Quality and Systems Implementation
Metrix Software Solutions
Phone: + 27 (0)11 465 6944
Fax: + 27 (0)11 513 0093
Personal cell: +27 (0)82 881 9389
Email: ss@isometrix.com