Hannah Luce, Governance Director at TMGA Wealth Management looks at the importance of good governance in an organisation.

It is perhaps easy for the true meaning of corporate governance to become lost in the enormity of the ‘governance brand’.  The need to define it can often lead us to confine it to a role, a job or a function, at the expense of realising the true extent of its reach.

Corporate Governance has long been seen by many as the responsibility of the board alone, with the support of a trusted governance professional to guide and advise them.  However, whilst the importance of the role of a board in implementing effective governance practices cannot be overstated, to be successful, governance must also be embedded into every particle of a business.

The Governance Iceberg
To use an analogy, corporate governance can perhaps be compared to an iceberg. The first layer is above water; it is clear, unambiguous, and visible to those looking for it.  In the corporate governance world, this layer would reflect the board function, decision making, the smooth management of board and committee meetings, and externally, the information that it publishes.

The second layer is just below the water.  It is still visible, but less so than the first, and harder to define.  This could refer to the control framework that a business puts in place; how it deals with its clients and other stakeholders;  how staff are expected to act, and the measures in place to ensure that its legal and regulatory obligations are met.  Whilst this second layer is unquestionably a key element of an organisation’s framework and is still somewhat visible within the business (and on occasion, outside of it), it is perhaps less of an obvious component of corporate governance.

The third layer of the iceberg is deep below the water.  Entirely invisible from the surface, but more considerable by far than the rest.  This is the governance culture of an organisation; the shared belief in its mission or purpose, and the desire to act ethically and transparently.  The ‘lifeblood’ of the organisation.  Without a culture of governance flowing into every task, every interaction, every decision, the top two layers of the iceberg cannot be supported.

Governance culture given its place…
The emerging acceptance of the importance of a good governance culture was demonstrated in 2018, when the UK Financial Reporting Council updated its UK Corporate Governance Code to include a new requirement for the boards of UK listed companies to “assess and monitor culture”, something that hadn’t been included before then.

When done well, a culture of good governance can support a business in its aims: with the attraction and retention of talented employees leading to unrivalled corporate knowledge; with staff collectively pulling together to drive the business forward, and investors confident in the security of their investment.

However, there is no ’one-size-fits-all‘ solution to creating an effective governance culture, which can take many years to build, and a significantly shorter period to destroy.  It must be continually assessed and improved, with the board setting an authentic and consistent tone from the top.

Corporate Governance and TMGA
From the outset, TMGA was built on strong governance principles.  From its team of senior professionals with complementary knowledge and experience and a focus on creating transparent relationships with its stakeholders, to the early creation of a Governance Director role, TMGA demonstrated its commitment to creating a solid governance culture.

TMGA has also utilised the unique opportunities available to it: the ability to create a robust, yet nimble investment governance and control framework from the beginning, based on the significant experience of its senior management team and unimpeded by challenges that can come with having to improve established practices.    

Put simply, TMGA was able to design its ideal environment from the start, with good governance at the centre.  Just like the metaphorical iceberg, this careful creation of a governance focused culture allows the established investment governance and control framework to operate effectively.  This in turn supports the board in the decisions that it makes, all of which are focused on providing investment solutions to clients in a thoughtful and transparent way.