Corporate governance should be value-led - CNBC Africa

Corporate governance should be value-led


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The IT Leaders Africa Summit will take place from 18 to 19 March 2014. PHOTO: Getty Images

Transparent information technology (IT) governance was one of the key themes at the IT Leaders Africa Summit, currently taking place at the Maslow Hotel in Sandton.

(READ MORE: Technology and the employment of Africa’s future generations)

Mike Jarvis, chief executive officer (CEO) of Oversight Solutions and a speaker at the conference emphasised the need to change the way businesses see governance.

“If our companies are run on a single-value perspective where shareholders are the main part of our operation and profit is the major driver then a compliance-led approach to governance is what we will get. Fundamentally, the way we’ve run companies encourages that kind of behaviour,” he said.

“We’re now talking about governance being a value proposition as opposed to being a cost imposition. Governance is all about maximising value. It’s not about minimising cost.”

Jarvis believes that way that companies have been run in the past has allowed them to accept that maximising short term profits on behalf of shareholders is the right thing to do.

“We should be giving the board the duty of maximising sustainable value on behalf of all stakeholders – value not profit, stakeholders not shareholders – and that is a fundamental, different way of running a business,” he explained.

(READ MORE: Nigeria institutes new governance rating system)

“That’s what I call a modern approach to governance. It encompasses the bottom line, it looks at financial situations but it looks at the social, environmental situation as well, the driver is value and the beneficiaries are stakeholders.”

He also frowned upon traditional auditing as a means of governance and stressed the need for internal regulation.

“Traditional auditing is ‘tick-box’. I classify this type of governance as a cost imposition. Good governance means internal regulation and independent assurance. Most companies are prepared to govern in an area where they understand – that’s where the CIO comes in in IT, to make sure the director can understand,” Jarvis said.

“We’re in an information revolution. We’re connected and borderless – we’ve got to recognise that. We’ve got to recognise that this is a very different environment.”