7 August HONESTY AND TRUTHFULNESS - CAN THE CORPORATE GOVERNANCE FRAMEWORK® HELP? (2023-08-07) August 7, 2023 Board of Directors, Corporate Governance Framework®, General, Governance Framework, Leadership, Praefectus™ Corporate Governance Framework®, board of directors, honesty, truthfulness, leadership, truth By Jené Palmer (CGF Research Institute: Director) Authentic leaders embrace honesty and truthfulness as core principles of their leadership style. They strive to build trust, inspire their teams and foster an environment of openness and integrity. This approach appears to be cut-and-dried. However, in reality, being honest and truthful can be rather tricky. Being honest is commonly defined as a virtue which requires one to be sincere in one’s actions, words and behaviour. Simply put, it means not telling lies, behaving fairly and acting with integrity – even when faced with difficult situations. As such, honesty is the bedrock of trust, credibility and respect. Truthfulness, on the other hand, specifically refers to the act of telling or representing the truth in a given situation. It focuses on the accuracy and reliability of the information conveyed and sharing the full truth regarding an issue or topic under discussion. Consider the scenario where the subsidiary management needs to report to the parent company board. Board packs will have been distributed in advance to ensure that board members and executives (the leaders) are able to review the facts, enabling informed discussions before reaching decisions. They recognise that rushing to conclusions without a comprehensive understanding of the situation can lead to errors or misrepresentations. If such diligence is indeed being practised by boards and management, why then do board evaluations and perception surveys reveal discord and dysfunction at decision-making levels? Applying the principle of Occam’s Razor (the simplest answer is often always right), the cause of the strife can often be attributed to the fact that there was not full disclosure of information. While the information as presented in the board pack may have been true and factually accurate, the whole truth may not necessarily have been reported. As a practical example, management may have disclosed to the board that 70% of the organisation’s customers have been migrated onto the latest technology platform leading the board to believe that its customer migration strategy is on track. However, would the board reach the same conclusion if it had known that the remaining 30% of the customers who have not transitioned to the new platform, make up 80% of the revenues? “No man for any considerable period of time can wear one face to himself and another to the multitude, without finally getting bewildered as which may be the true” - Nathanial Hawthorne It is only by integrating honesty and truthfulness that transparency is truly achieved. When making decisions or providing information (internally or externally) that may impact the organisation or its stakeholders, board members and management should ensure that they provide all relevant and accurate information. Hiding or selectively presenting information can be misleading and will undermine trust. The Corporate Governance Framework® promotes a culture of transparency by providing evidence to validate the information being presented. Open communication and full disclosure support authentic leadership by encouraging frank debate and constructive discussion ensuring that there are no “sacred cows”, all the while cultivating a deep respect for listening to team members’ contributions. Greenwashing is another example where honesty and truth can become blurred. The ambiguity of sustainable reporting standards and disparate and/or unverifiable metrics combined with performance incentives which are linked to ESG targets, increases the pressure on organisations (and their leaders) to exaggerate the positive impacts of their sustainability initiatives. In these circumstances it becomes even more critical for board members and executives to match the reality (the whole truth) to what is being presented. To be able to positively challenge factual data which is being presented in the context of prior commitments, board members and executives need to know what questions to ask. “EY global survey of senior finance leaders and institutional investors, published in November 2022 revealed that 88% of investors believed that: “Unless there is a regulatory requirement to do so, most companies provide us with only limited decision-useful ESG disclosure.” The Corporate Governance Framework® makes intelligence available by transparently disclosing whether ESG oversight is effective in supporting true and honest claims being made about inter alia diversity and inclusivity targets, employee engagement, human rights, ethics and greenhouse gas emissions. Governance best practice in South Africa emphasises the importance of ethical conduct, transparency and accountability being applied across all aspects of the organisation’s strategic and operational activities, making honesty and truthfulness critical elements of effective leadership. In a country which faces unprecedented levels of corruption and a myriad of ethical challenges, honest and truthful leadership sets a positive example. It encourages ethical behaviour throughout the organisation, promoting a culture of integrity. ENDS Words: 732 For further information contact: Terrance M. Booysen (CGF: Chief Executive Officer) - Cell: +27 (0)82 373 2249 / E-mail: [email protected] Jené Palmer (CGF: Director) - Cell: +27 (0)82 903 6757 / E-mail: [email protected] CGF Research Institute (Pty) Ltd - Tel: +27 (0)11 476 8261 / Web: www.cgfresearch.co.za Follow CGF on Twitter: @CGFResearch Click below to read more... Attached Files honesty-and-truthfulness-can-the-corporate-governance-framework-r-help-20230807.pdf 252.95 KB Related Articles TANGIBLE BENEFITS OF A CORPORATE GOVERNANCE FRAMEWORK® Article by Jene’ Palmer Forward-thinking organisations have realised that corporate governance does not merely fall into the portfolio of the Company Secretary. Indeed, the draft King IV Report on Corporate Governance for South Africa 2016 (‘King IV’), describes corporate governance as “the exercise of ethical and effective leadership by the governing body” of an organisation. Why then is corporate governance still viewed by many organisations as a process which increases bureaucracy and drives a ‘tick box’ exercise? Perhaps the explanation lies in not understanding and appreciating the value which can be unlocked by implementing a purpose-built Corporate Governance Framework® which is tailored to the organisation. Empirical research supports the fact that good corporate governance translates into tangible and sustainable benefits for the organisation. Some of these benefits are set out below. CORPORATE GOVERNANCE: STAGNATION, SCRUTINY AND THE URGENT NEED FOR DIGITISATION (2025-03-10) Another governance crisis waiting to happen In recent years, corporate governance has become a hot topic following scandals like Steinhoff, Tongaat Hulett and many others, but despite increased attention, significant and material progress in improving governance practices across organisations remains alarmingly scarce. Governance frameworks in most organisations continue to be outdated, underdeveloped, and often untested and this leads to recurrent corporate failures and directors being increasingly exposed to personal liability. Furthermore, the lack of scrutiny and digitised tools to assess governance maturity and performance means that there is no real accountability until it is too late and governance failures are, therefore, likely to persist. BOARDS THAT CREATE VALUE: CORPORATE GOVERNANCE FRAMEWORK® By Jene’ Palmer and reviewed by Terrance M. Booysen It has been painful to watch the likes of Lance Armstrong, Mike Tyson and Hansie Cronje sabotage their futures through poor decision-making. Similarly, many organisations and their boards have failed to demonstrate strong and responsible leadership qualities to motivate and drive their organisations to success. Awareness, decisiveness and accountability are some of the business leadership qualities required to achieve remarkable performances. The ‘buck’ stops with the board of directors and it is the board of directors who are ultimately held accountable for the success of the organisation. However, with the business landscape changing at an accelerating rate, risk management and decisive decision-making are becoming more challenging and business failures more prominent. A recent Harvard Business Review reports the failure rate for mergers and acquisitions to be between 70% and 90%. According to the United States Small Business Administration, only 44% of new businesses are still in existence after four years. Against this backdrop, how does a board create a sustainable organisation in what are clearly turbulent times? DO YOU REALLY NEED A CORPORATE GOVERNANCE FRAMEWORK®? By Jene’ Palmer and reviewed by Terrance M. Booysen We know that both local and international organisations are continuously having to adapt to operate in uncertain business environments. Locally, the release of the Preferential Procurement Regulations 2017, which places stronger emphasis on ‘radical transformation’, against the backdrop of persisting low economic growth rates are only some of the elements giving rise to further uncertainty. Internationally, the business and regulatory implications of the election of President Donald Trump and the vote in favour of Brexit and how these events will impact on local markets and businesses, is still unfolding. It therefore comes as no surprise that recent governance, risk and compliance (‘GRC’) surveys all indicate an increasing need to improve risk oversight and to balance opportunity management with risk management. The challenge lies in being able to achieve these objectives! USING THE CORPORATE GOVERNANCE FRAMEWORK® IN TIMES OF GREAT UNCERTAINTY (2021-11-17) Whilst most corporations across the world have had to make drastic changes to their business operations as a result of the Covid19 pandemic, many business leaders believe that the disruptions caused by the pandemic have inadvertently introduced more advantages than disadvantages. However, are the odds actually stacked against the organisation? DIRECTORS’ SENTIMENT INDEX™ REPORT: 5TH EDITION – CGF’S OBSERVATIONS FROM A GOVERNANCE PERSPECTIVE (2020-11-12) A review of the Institute of Directors in South Africa (‘IoDSA’)’s recently released report for 2020 raises some interesting observations from a governance perspective. It should be noted that the study was concluded prior to the nation-wide lockdown and national state of disaster due to the Corona virus (‘Covid-19’) pandemic. It is likely that the sentiments expressed by respondents may have been significantly more pessimistic had the study been concluded in the second half of 2020. Comments are closed.