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Good governance in a local government environment

Government must harness the power of ethics which is assuming a new level of importance and power. This is the word by Terry Booysens, CEO of the Corporate Governance Forum, who addressed representatives of the Public and Private sector at ForgeAhead’s ICT in Local Government Summit last year.

Booysens says that to apply good governance and ethics in a local government environment, one first needs to understand what corporate governance is and must view it with a 'fresh set of eyes'. He notes that key to effective governance for local government is ensuring that citizens get value for money through honesty. "Honest government equals honest citizens," he adds.

Good corporate governance, according to Booysens, is about 'intellectual honesty' and not just about sticking to rules and regulations. Connecting corporate governance with legislative risk management is however still important as guidelines and staying within the parameters of the law.

Ultimately, corporate governance must ensure all stakeholders get value for money and is essentially about using best business practices to enhance organisational performance and wellbeing, while adding shareholder value. But through all this one needs to clearly understand the role of board versus management. In the public sector this can be seen as national legislation versus local government implementation.

If 'value for money' included moralistic values, says Booysens, then one would need to also look at probity, fiduciary, and integrity - which means uprightness and honesty, trust and trusteeship, and dealing with moral uprightness, honesty and soundness.

Citizens need to trust that their local government and municipal management will do what is in their best interest and on the other side of the coin; management must listen to what its citizens need.

Referring to good corporate governance and its rewards, Booysens says: "Research by the Institute of Business Ethics (IBE) has shown unequivocally that companies with a clear commitment to ethical conduct outperform those which do not." Relating this back to government, the same can apply.

"Returns from socially responsible investments can often be superior to those from conventional investment and also have enormous spin-offs including: Investor confidence, economic growth, empowering people, developing skills, creating infrastructure, fostering entrepreneurship and creating jobs," he adds.

"We cannot allow distrust in our society," is the message Booysens is trying to get across.

Good governance should factor local government's levels of legislative compliance with executive-level compliance focused on establishing consistency and standards and an embedded process. Attention should be given to efficiency and benchmarks should be done regularly against outputs to ensure this happens.

Says Booysens: "Corporate governance is drawing attention and focus from everywhere. When there is failure, it requires questions of the effectiveness of board and management, director's accountability and their respective remuneration versus reward." Risk assessment and management processes are key to effective governance and should be constantly monitored for efficiency. Financial reporting also has to comply with new laws, and to prevent unnecessary complications the effectiveness of audits and their independence must be ensured.

Booysens offers a few steps to improving corporate governance. He suggests adopting reforms aimed at correcting abuses and implementing effective new ways of assuring their long-term survival and success. "Governments must increase their regulatory role even as companies seek to reform their own internal practices, but note that this may create tension between governmental regulation and corporate self-regulation."

He adds, however, that regulation per se does not guarantee good corporate governance. Regulation must be a natural extension of any institution's most fundamental purpose and the central aim of any responsible senior management team.

Good governance requires ethical standards that guarantee justice, truthfulness, diligence and loyalty. The law can play a role in guaranteeing that such standards prevail, but for high ethical standards to become the norm, they must be lived and practiced, rather than merely legislated.

Corporate governance trends, says Booysens, will see a move towards taking an exclusive to inclusive approach - emphasising sustainable success. "The importance of risk and legislative risk management is increasing, along with the importance of integrated sustainability management and reporting structures. Institutions are striving towards conformance and performance, whilst always respecting stakeholder activism," he concludes.

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