15 Questions to determine whether an organisation suffers from bad corporate governance.

To determine if an organisation suffers from bad corporate governance, it’s important to ask a series of critical questions. These questions can help reveal whether there are systemic issues in how the company is governed and managed. Here are some key questions to consider:

1. Is there a lack of clarity in roles and responsibilities? Unclear definitions of roles and responsibilities can lead to power imbalances, confusion, and inefficiencies.
2. Are there frequent conflicts of interest? Conflicts of interest, particularly if not properly disclosed and managed, can indicate a governance problem.
3. Is there a lack of accountability among senior management and the board? A key sign of poor governance is when leaders are not held accountable for their actions or the performance of the company.
4. Are financial reports and company performance data regularly delayed or unclear? Transparency in financial reporting is crucial. Any evasion or delay in sharing this information could be a red flag.
5. Is there a poor relationship between the board and management? A lack of cooperation or a strained relationship between the board and management can impair effective governance.
6. Are shareholder concerns and rights regularly ignored? Disregarding the rights and concerns of shareholders suggests a lack of fairness and respect for stakeholder interests.
7. Is the board lacking in diversity or independence? A board that lacks diversity or is too close to management may not effectively oversee the company.
8. Is there resistance to external audits or regulatory compliance checks? Reluctance or resistance to external audits can indicate that the company has something to hide.
9. Are ethical guidelines and policies either lacking or not enforced? A disregard for ethical standards and a lack of enforcement of existing policies is a serious governance issue.
10. Is there a culture of secrecy rather than openness? A culture that does not encourage openness and transparency can hide many governance issues.
11. Are risk management practices inadequate or non-existent? Poor handling of risks can lead to significant problems down the line.
12. Is there a short-term focus at the expense of long-term sustainability? Prioritising short-term gains over long-term sustainability and stakeholder value is a poor governance practice.
13. Is there a high turnover of board members or senior executives? Frequent changes in leadership can be a sign of internal turmoil and governance issues.
14. Are there consistent legal issues or disputes with regulators? Regular legal troubles or disputes with regulators can indicate a disregard for legal and regulatory compliance.
15. Is there a lack of strategic direction or frequent changes in strategy? A lack of clear, consistent strategic direction can signal poor leadership and governance.

Final thoughts

These questions can help in diagnosing issues in corporate governance. However, identifying the problems is just the first step; addressing them requires a committed effort from the top of the organization to foster a culture of good governance, transparency, and ethical behaviour.

Disclaimer: The information provided herein is solely for informational purposes and represents my own personal views. It should not be construed as legal or regulatory advice. For advice specific to your circumstances, please consult a qualified professional. Additionally, the opinions expressed are my own and do not reflect the views of my employer.