Governance And Societal Responsibilities Organisational Governance Business Essay

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Governance is about people and how they organise themselves to attain their common objectives. Governance and societal responsibilities are integral parts of an organisation. As Aras and Crowther (2010, p. 11) suggests, "Good governance offers some long-term benefits for a firm, such as reducing risk, attracting new investors, stakeholders and more equity." Thus, it is essential for an organisation to review and achieve all the key aspects of the governance system, such as accountability and transparency. It is equally important for the organisation to fulfill its societal responsibilities as by doing so, not only will the company benefits but also, the society will benefit.


An organisation must have a culture of accountability. To be more specific, all the employees in the organisation must understand and meet their obligations. It is the responsibility of the leader to build and nurture this kind of culture whereby am atmosphere of mutual responsibility and obligation is created. Moreover, leaders need to be accountable themselves as they are the one who set examples for others in the organisation.

According to Corelli, an accountable leader should be able to:

Take responsibility for positive results.

Implement change necessary for survival and success of the organisation.

Recognize and build talent.

Take ownership to handle and solve problems.

Consistently seek ways to become a better leader.

Hence, it can be argued that leaders should not disregard accountability as it is one of the most important characteristics of effective leaders.

Financial accountability

Financial accounting is a means of making sure that public money has been used in a productive and responsible way. It is also concerned about verifying whether the value for money has been achieved in the use of resources. In order to review the fiscal accountability, it is of great essence to employ competent bookkeepers or accountants in the organisation whereby the latter will have a record of all the money that comes and goes out of the organization, thus making it easy for the senior leader to monitor the financial transactions. A computerized bookkeeping system will facilitate this task as it will be easier to enter and add data.


Transparency is usually seen as a must for good governance and sound financial regulation. By definition, it means being honest about the materials and procedures a company uses. At PricewaterhouseCoopers, a multinational professional service firm, the employees are reviewing the ways in which they work and they are also describing themselves in order to make sure that the principle of transparency is being put into practice. Similarly, to achieve transparency in an organisation it is important to:

Make sure senior leadership is aligned.

Keep people informed.

Information should be managed in a timely and accurate way.

Close the perception gap between senior leadership and middle managers.

Help people understand the true financial impact of decisions.

Protection of stakeholders and stakeholder interests

As part of the governance responsibilities, it is pivotal to ensure the protection of stakeholder's interest in a liable manner. Fontaine et al (2006 cited Freeman 1984) defined a stakeholder as "any group or individual who can affect or is affected by the achievement of the organization's objectives". The main groups of stakeholders include employees, customers, suppliers and shareholders. It is essential to treat them fairly because companies are dependent on them to obtain the necessary resources for their development and survival. Moreover, a mechanism should be provided for stakeholders to participate in improving a company's performance and their views should be considered when taking important decisions.

In sum, good governance is important for the continuous operation of any company. In fact, nowadays, to compete successfully in the ever changing environment, leaders need to be more innovative in their day to day work. As a result, improving leadership development is critical for organisational success.


In the simplest term, performance evaluation also known as performance review is a formal review of an employee's performance normally covering one year period. The performance of senior leaders and the CEO are significant factors for successful governance and the achievement of an organisation's mission. In fact, as Jackson et al (2003, p.185) suggests, "chief executives need to be quality-conscious, customer-oriented and constantly improving their performance." Consequently, given that the CEO directly influences the success and financial performance of an organisation, it is imperative for the board of directors to set performance standards, and then objectively and fairly evaluate the performance of its CEO against those standards.

Generally, assessing the chief executive is considered as one of the board's primary governance responsibilities and this assessment clarifies the chief executive responsibilities, job expectations, annual goals, and it also captures the board's perception of the executive's overall performance.

The primary purpose of an evaluation is to bring the CEO and the board together to discuss how their performance and priorities contribute to the effectiveness of the organisation. The emphasis should be on identifying what works well, and what needs improvement. Given the unique nature of the partnership between the board and CEO, assessing CEO performance is, in many ways, assessing the performance of the board as well. The performance of senior managers is usually measured by what they do to get their results.

The CEO evaluation process should be designed to:

Assess how well the organisation is fulfilling its mission

Examine and re-set, if necessary, goals for the organisation

Support the CEO by providing constructive feedback on performance

In order to ensure that the evaluation is accurate, employees should provide feedback to senior leaders and based on the feedback, performance can be improved. Generally, managers and leaders within an organisation use 360 feedback surveys to get a better understanding of their strengths and weaknesses. A 360 degree feedback provides people with constructive feedback on how their work-based behaviour is seen by their colleagues (Peacock 2007, p. 7).

With a proper evaluation system, the CEO will be able to maximize his strengths and minimize his weaknesses. The company will be able to capitalize on what the leader does best and increase the success of the business. A performance evaluation can prove to be very successful in determining the effectiveness of a CEO. The intent of this review is to provide an opportunity for the senior being reviewed to obtain feedback on performance and areas where leadership development would be of benefit. This process also helps to foster a sense of teamwork between the board and the CEO. Evaluating the CEO can be a time consuming process, but companies who have successfully implemented such a programme are successful over all.

According to Zwane (2009, p. 25), "the most common decisions based on the evaluative objectives concern compensation." More specifically, these evaluation methods help in determining executive compensation.

In today's fast changing business environment, organizations are more concerned about competition and the quality of their products and services. Thus, it has become even more important to evaluate the performance of senior leaders including the Chief Executive as they are the role models for the employees.