In a recent McKinsey Quarterly article, another perspective on governance emerged. If one focused on the recent media discussions, you might conclude that good governance is simply a way to keep your job and stay out of jail. But the truth goes much further than simple self preservation. According to McKinsey, "in emerging as in developed markets, companies that adopt strict corporate-governance practices are being rewarded by institutional investors."

Ten widely recognized principles were cited by the firm as contributing to good corporate governance:

1.		Transparent ownership
2.		Board size (5 - 9)
3.		Board accountability
4.		Dispersed ownership
5.		Independent audits and oversight
6.		Ownership neutrality
7.		Broad, timely and accurate disclosure
8.		Accounting standards
9.		Independent directors - no more than half to be executives of company
10.		One share, one vote

In our own practice, we have found that principle #7 is perhaps one of the most challenging. What is to be disclosed and how is tough news to be managed. And indeed, is the CEO even aware of all the potential liabilities, not just financial but also in other arenas, such as people, management practices, etc. A good management audit by an independent organization development firm, can not only tell the CEO what's working well, but can also unveil problem areas before they become significant liabilities for the CEO and the company.

For more information on both board governance or management audits, e-mail us at LarcenGroup.com.