By Sylvia Groves, Principal, GG Consulting

There are three tiers in governance. The tier your organization is on is often a matter of attitude as well as action.

1.    Compliance - the company sees governance as ticking the boxes and complies with the letter of the law because they have to

2.    Risk management - the company sees good governance practices and programs as a way to reduce risk for the organization and its directors

3.    Adding Value - the company views governance processes as a way to add value for the organization by enhancing the effectiveness of the board

A colleague from the Society of Corporate Secretaries and Governance Professionals once commented that, "Compliance is an impoverished view of governance." I have to say I agree. At least on the basis that you leave opportunities on the table if you operate at compliance level only. That being said, each company needs to look at its own situation and determine what is right for it, given its size, complexity and organizational values. It is perfectly appropriate for a start-up company to operate at the compliance level when it is occupied with getting itself up and running. At some point, however, it is time to see governance processes as an opportunity to manage risk and then an opportunity to add value strategically.

Let me give you a concrete example of the three tiers in action. Looking at a board evaluation process, required in Canada for listed companies for many years now, and open to interpretation as to format by those companies.

1.    Compliance

Could look like a number of things, but likely a management administered questionnaire or an open discussion at a board meeting where directors may be reluctant to be frank or may choose their words carefully so as not to upset board and management dynamics. This gets the job done - ticks the box - but doesn't really do much for the organization and isn't really an "effective" evaluation.

2.    Risk Management

Taking it up a level may mean providing responses to a detailed questionnaire anonymously to the Corporate Secretary for analysis and reporting. Recommendations on continuing director education or specific concerns from the prior year identified by directors can be acted on at this level. It may also include some form of non-threatening peer review, such as one-on-one discussions with the Governance Committee Chair or the Board Chair. Everything comes back through the Governance Committee and the Board and they have time to discuss the issues in camera. To truly manage risk, to show the board's due diligence, there must be outcomes and action taken in response to issues identified. For example, it could be identified that the directors want more education or specific details from management on a particular aspect of the business. Translating that into an education session or new memo is what manages the risk.

3.    Adding Value

At this top tier, evaluations are often received, analyzed and reported on by an independent, third-party advisor who can reassure directors that their comments will remain anonymous and important issues will be brought forward. A strong governance background in the advisor ensures insight into current and potential issues. At this level, it is very much about being proactive and strategically planning for the future. Looking at the current board and how its needs may change in the next few years. Ideally, companies begin to incorporate processes like a 360 degree review from relevant members of management (also anonymous) and, at the pinnacle, specific peer-to-peer reviews may be conducted with a shared goal of continuous improvement and with a strong foundation of respect. Specific, actionable recommendations will come out of the evaluation and be acted on to enhance board effectiveness.

When you think about this view of governance, where is your organization on the three tiers? Is that the best place for it to be?

Sylvia is a valuable contributor and presenter of the CBDC’s ‘Get on Board’ Education Program in Calgary.

For more information, please visit www.grovesgovernance.com or email her at This e-mail address is being protected from spambots. You need JavaScript enabled to view it