New Zealand: Governance Codes And Regulation: A Warrant Of Fitness, Not An Indicator Of Driver Capability!

Last Updated: 3 January 2018
Article by Denis Mowbray

I recently took my car in to get its yearly warrant of fitness (WoF) check. While waiting, I was chatting with the mechanic, lamenting the terrible number of deaths on our roads over this last year. When he made the following logical observation; that a WoF, certifies that the car is safe for use, as prescribed by the code, it does not certify the driver or their behaviour.

Simply, the vehicle doesn't cause accidents; driver behaviour does!

After leaving the garage, I was reflecting on this and the recent "Play the Game Conference 2017," at which I presented on the topic of behavioural governance. There were many fantastic presentations and discussion panels on various governance, integrity and anti-doping codes and issues. These either added to, or expanded on the plethora of information that discusses the changes made to, and or the benefits of various governance codes implemented in almost every jurisdiction around the world.

It struck me, that governance codes, and an organisation's adherence/compliance with them, is just like my cars WoF. When tested, it certifies that an organisation is fit to be operated, while also identifying if the organisation has areas of weakness that need repair or replacement.

Even so, just as a car WoF does not review the driver's behaviour. An organisation's compliance with a governance code, does not review the behaviour of the drivers; the board and executive and how their behaviour may cause/contribute to the destruction of tangible or intangible organisational wealth.

Please do not jump to the conclusion that I am opposed to the implementation and use of codes of practice. Or, that I am opposed in some way to reviewing organisations to ensure that they have a metaphorical, 'warrant of governance fitness' (WoGF). I am not!

However, I am anti the lazy narrative and conclusions that arise from poorly constructed arguments surrounding board review methodologies where the near totality of the review focuses on compliance or conformance to a code. Worse still, when the mythology surrounding these reviews, suggests not only a correlation, but also causation between codes of practice, and organisational performance.

What passes as a board performance review is in most cases, little more than a review of their adherence to various codes of governance, conduct and or integrity. Which, save some minor infractions, show them as compliant. Therefore, the board performance is excellent. As we all know, it is not that simple. Yet, the greater majority of board performance reviews treat it as though it is.

However, because a director's governance behaviour is influenced by internal/external unwritten codes, biases, and pressures. This has allowed those same organisations to become embroiled in money-laundering, corruption, mis-reporting (lying) about revenues and much more.

This behaviour maybe being driven by moral licensing, or simply a lack of trust in their rivals or the system (code) itself; "they all do it, so its ok for me/us to as well."

The international sport environment is no different. However, a key difference between the corporate and sport sectors is; international and national sport federations are less open to public participation, or any effective form of public scrutiny and accountability. Furthermore, unlike the corporate sector, most international federations fail to pass their WoGF.

Leading to a majority of these federations being governed by a heady mix of very poor compliance with governance, conduct or integrity codes, combined with behavioural attributes and characteristics, that are predicated on an unequalled sense of entitlement, leading to the all too familiar problems of, poor transparency, dictatorial edicts, corruption, bribery, cheating, etc.

As is evidenced by the large numbers of these federations who regularly appear on the front page of major papers for various infractions, e.g. FIFA, Boxing, etc.

For example, over recent times Fifa has implemented many reforms, enhancing the powers and standing of its governance committee, and codes of conduct and integrity. Yet still, the behavioural characteristics and attributes remain unchanged, as identified in these excerpts from an article, quoting members of the Fifa Governance Committee:

We were dealing with a game, and its organisations, including national football associations, generally extremely resistant to independent scrutiny, lacking real democracy and integrity, dominated by a small group of people resistant to public accountability, in a context of huge economic stakes and endemic political interference.

It wasn't a lack of codes or their appropriateness; it was that the behaviour that remained unchanged, as the Fifa Governance Committee tried to breathe life into the codes, as evidenced in this next passage:

We tried to effectively and impartially enforce Fifa's stated principle that members of the Fifa council must be politically neutral. Our decision, in that context, to ban the Russian deputy prime minister Vitaly Mutko from elections led to a backlash from the new Fifa leadership against our independence. We also tried to enforce gender equality, human rights, and regulate the integrity of Fifa elections, and faced resistance on all of them. Ultimately, it became clear to us that the leadership, in order to secure its own survival, could no longer support our independence.

The members of the Governance Committee were removed from their posts, at the 2017 Fifa Congress. Why, because, they wanted the behaviour of Fifa to reflect what was written in their various codes, etc.

Fifa's codes of governance are not at fault, the behaviour of individuals within the executive board and executive is!

A significant body of evidence exists, identifying the behaviour of individuals, and the groups they form (boards), as the real drivers of performance. The positive or negative boardroom behaviour of the Chair or senior director will influence the performance of the other directors or executives, for better or worse.

For example, several reviews I have conducted identified director's individual and collective behavioural attributes and characteristics as adversely influencing the board/executive relationship. Relationship breakdown caused through behavioural dissonance, not only occurs inside formal meetings, but importantly, in external (formal/informal) settings.

This breakdown leads to decreased levels of trust between individual directors and or the collective board and the executive. The seriousness of the issues faced by organisations with this occurring, rise exponentially. As trust diminishes, so the board calls for ever greater levels of transparency, causing the wheel of distrust to spin faster and faster and the board executive relationship to disintegrate into barely disguised hostility.

One outcome from this poor relationship and lack of trust is a decline in the executive's access to and use of the collective skills and tacit knowledge of directors. This is significant because it inhibits the executive's utilisation of the skills and tacit knowledge of directors through adaptation, innovation or replication, for the advancement of the organisation.

All of which, has a negative influence on organisational performance.

To remedy this obvious failing in our governance review processes. We must begin to look at the governance performance of boards and executives through a behavioural governance lens. Behavioural governance, views the characteristics, attributes, drivers, motivators and barriers that shape the behaviour of the individual and the collective board and executive. Identifying how these behavioural elements influence and impact the individual and collective, and subsequently how they influence or impact organisational performance.

The call to action is simple: if you want insights into what is holding back the performance of your organisation, however, that is measured. You must start reviewing your organisation's governance performance through the lens of behavioural governance.

Those who practice great corporate governance do not slavishly adhere to a collection of code's rules and regulations, for no law is perfect. They continually acknowledge the importance of, and explore the mysteries that are grounded in the behavioural attributes and characteristics of all its actors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Denis Mowbray
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions