Corporate Governance and The Human Resource Management Function

Corporate Governance and the Human Resource Management function – is there a link?

• Is there a role for HR in the corporate governance framework and operations of an organisation?
• If so what might it be and why hasn’t HR always worked in that type of role?

The implications of the Global Financial Crisis still lingers for most organisations, either because of the lasting direct impact that it had and may still have on their operations, or because they realise that, but for circumstance at the time, they might have been more significantly affected than they were. For some organisations, they are continuing to focus on how better corporate governance might assist to better ‘GFC proof’ them for the future.

Government and business have had some time to try and address the underlying problems that often lead to corporate governance problems and to try out options for improvement. While the intent behind these considerations are well-meaning, for some organisations, they have slowly reverted to close to their pre GFC view of corporate governance – with ‘tick the box’ exercises and variable focus replacing the urgent and important status that it had a few years ago.

Corporate governance requirements can often be rationalised to be simply meeting legal requirements, rather than also meeting the intent behind the legislation. Too often, a focus on compliance and conformance to corporate governance policies and procedures overshadows or replaces the need to also understand the extent to which the correlation between corporate governance failure and deep-seated organisational culture problems exists and is being managed within a workforce.

Critical to establishing and maintaining a good corporate governance culture is the extent to which the most senior leaders in an organisation model the importance of good governance, how it looks and feels to work in a well governed organisation, and actively encourages and recognises behaviour and actions that underpin a good corporate governance culture

HR’s role in corporate governance

There are some consistent pointers to the role that HR can play in developing and sustaining good corporate governance in an organisation.

These include:

• Transparency in the appointment of staff, especially senior executive staff;
• Ensuring that remunerative arrangements are managed consistently and in accordance with policies and guidelines
• Establishing and applying agreed competency profiles to roles across the organisation that support a culture of good corporate governance
• Ensuring that organisational strategy is able to be delivered by the workforce, and identifying areas where development or expansion of capability is required to meet the forecast needs and also to minimise the risk of under achievement of expected objectives.

Some key messages for HR to succeed in supporting good corporate governance.

If the HR function is to be able, and be seen to be able, to support good governance, it needs to consider:

• Changing how they see themselves and how others see them, from HR first and business second, to a more balanced view of both roles in terms of how they operate;
• Demonstrate to the Senior Executive how they value add to the establishment and maintenance of good corporate governance, via policies, procedures, programs and reporting that confirms on track performance in areas such as recruitment, capability development and culture and values alignment.
• Actually develop, manage and report against a HR plan for the organisation that shows clear alignment with the key objectives of the organisation.