(Good) Governance

Posted by on 04/06/11 in Governance, Government, Philanthropy, Stewardship

If one were to pick a single word to capture the essence of the 1960’s, it might be “ferment,” or “struggle.” The 1970’s could be embodied by “malaise” or “despair”. For the 1980’s both “patriotism” and “greed” resonate, while “party” and “technology” define the 1990’s. The 2000’s are still being digested, but the word “fear” (of terrorism, of economic collapse, etc.) would be a leading contender.

As we launch into the early stages of the 2010’s, the leading contenders for Word of the Decade look to be “democracy,” “globalization,” or perhaps “social media.” And while we can expect to see these words continue to play a role in the predictable predictions of the decade, we do not think that they will prove as impactful as our nominee. Being a bit contrarian, we at Syntrinsic propose that this decade will be defined by a word with little sex-appeal, one rarely used by even the most well-informed pundits, and one rarely used in regular conversation. It has its stalwart fans and even a handful of junkies (some of whom happen to be clients), but this word is not top of mind for even a modest percentage of the population. The word? Ready? Take a deep breath…

“Governance.”

Yeah. We thought you’d feel that way. We do too! The sobriety, the gravitas. Say it out loud (in private of course) and you can feel the inner statesman start to stir. For those of you who wondered if we were geeks, you need wonder no more. Case settled. Syntrinsic has a thing for “Governance” and our readers want to know why.

We believe that “Governance” will define this decade—must define this decade—because no other word will have a greater impact on the ability of our society to right what’s wrong and make meaningful progress toward crafting a sustainable and civil society.

What does it mean? Webster’s defines Governance as “the exercise of authority; control” as well as “a method or system of government or management.” Like other somber words such as fiduciary and stewardship, one generally assumes that to discuss governance is to assume one means good governance; thus, how one exercises authority well, or a constructive, responsible system of management.

Why does governance matter? Consider this year’s top stories:

Foreign Policy
Brutal dictators long financed, armed, and otherwise supported by the United States are under fire from their own people, many of whom also are angry with America for supporting their oppressors. How should we respond? To what extent should America condone and actively support bad governance elsewhere in order to serve the near-term interests of our citizens? In short, when if ever is it good governance to support bad governance?

State of the States
Over the decades, elected officials throughout the country have made compensation and benefit commitments to government employees that attracted votes but are not financially tenable. Simple tax increase or a few layoffs will not address financial agreements that are fundamentally unsound. What is a Governor, Mayor, Superintendent, or Chief to do? How do officials elected by a majority of their constituents make the necessary financial and policy decisions that by definition must negatively impact a majority of their constituents? How can a governor govern people that want, nay demand, financially irresponsible governance?

Corporate Governance
US papers are full of pictures of the directors of Japan’s Tokyo Electric Power Company bowing apologies to civilians made homeless by fears over nuclear meltdowns at some of the firm’s reactors. Meanwhile, in America, few if any directors of AIG, Goldman Sachs, Citigroup, Merrill Lynch, Bank of America, Wachovia, Wells Fargo, Fannie Mae, Freddie Mac, Morgan Stanley, General Motors have even been publicly named, let alone held accountable by regulators, press, or the public for decisions made by the companies they supposedly governed into crisis. So what do we expect from corporate governors? Are there meaningful consequences for serving poorly as a corporate director? And if we cannot feel confident about corporate governance, then how does that impact confidence in the investment markets, let alone faith in the country’s economic underpinnings?

Nonprofit Governance
Okay, so we will concede that as usual, there are few headlines about nonprofit governance. Yet if one looks closely at the pressures faced by the generally volunteer directors of nonprofit organizations, there have been few times as difficult as this. Pressures to provide services have risen in the face of economic crisis, joblessness, and government cuts,; the financial models of many nonprofits—particularly those that rely on fund raising—are under great strain; and, few nonprofit boards operate with the resources, time, or expertise available to corporate boards and government agencies. To complicate matters further, members of both parties and the current White House keep questioning aspects of the tax code vital to nonprofit viability. Given these pressures, what does good nonprofit governance look like? Are we as a society willing to accept the cost of lazy, self-serving, or simply poor nonprofit governance? Can we even comprehend what that cost would be?

We believe that there are principles of good governance that can guide foreign and domestic decision makers, as well as the officers of for profit and nonprofit entities. And we believe that some version of these principles must become a more common part of the rhetoric of those who govern AND those who are governed so that there is greater alignment of intent in this free market representative democracy.

Principles of Good Governance

Take a long view.
Strategic decisions must be made so that people 30 years from now—and likely much longer—will be highly likely to thank us rather than regret our time in charge.

Make sustainable decisions.
We cannot afford to make short term decisions that will need to be undone later. Short terms for elected officials and quarterly earnings announcements punish those focused on sustainability—but only in the short-term.

Consistently apply values.
Good governors have clear values and apply them consistently. Inconsistent values foster uncertainty, uncertainty creates fear, and fear undermines good governance.

Be financially sound.
One can ignore financial reality when one is running a Ponzi scheme or other short-term hustle (including those managed by governments and corporations), but effective governors understand that policy and finance must be rational, aligned, and self-supporting.

Establish clear accountability.
Governance requires well-defined responsibilities and a path for holding accountable those who are responsible. These roles must be broadly understood and formally accepted.

Cultivate a sense of honor.
Honor is neither prideful nor boastful; rather, it represents a desire to be remembered as an effective leader and manager who governed well. Some consider the concept of honor quaint or even archaic; we think it essential.

It can be tempting to sit back and judge those in the White House, Foggy Bottom and Congress, or to complain about the local governor or mayor or school board chair, to harp on the failures of corporate directors or negligence of nonprofit directors. After all, it is easy to critique those making difficult decisions, to question their motives and competence, and complain about their ineffectiveness.

But given our representative democracy with its free market system, the greatest governance challenge this decade will not be faced by those who officially govern, but rather by those who are governed, those who typically do not see themselves in positions of leadership, management, or even basic responsibility for society. What will the great “We the people” do when difficult decisions must be made, when compromises must be struck, when priorities must be established?

Will we educate ourselves, actively participate, and make sacrifices worthy of this moment in America’s history? Will we embrace—and be—the kinds of leaders willing to govern from a principled, skillful, honest place? Will we in effect approach our civic, work, and personal lives with good governance in mind? For if we do take these steps, anything is possible, even repairing the world.

And perhaps many years from now, the word they will choose to define our time will be “thankful” or “appreciative” or “redemptive.” Or maybe, just maybe, they will look back on the 2010’s and say it indeed was a time defined by “governance.” And we’ll all know what that means.