Future talks to Nicki Wood, Programme Leader of Lincoln University’s MSc in Governance, about the importance of the often neglected third letter in the ESG acronym, and what businesses of all sizes can be doing to put good governance first
The ESG acronym is universally accepted as one of the key themes that will shape the businesses of the future. While ‘Environmental’ and ‘Social’ concerns tend to dominate discussion among board members and the public, the third pillar, ‘Governance’, gets left behind all too often despite being an essential structural component in directing sustainable and ethical business practices.
But what exactly is the meaning of the term governance? The concept is easily misunderstood and has contributed to a general lack of awareness of its significance.
Nicki Wood is the Programme Leader of the recently established Master’s program in Governance at the University of Lincoln, UK, and says Governance is best understood in simple terms as “how the board of Directors direct and control the company.” The low profile of Governance as a concept is demonstrated by the fact that on postgraduate open days prospective students frequently ask her what the course is about, only realizing its importance upon further explanation.
“The word governance comes from a Greek word, which means ‘to steer a ship’,” she explains, adding that a naval analogy helps define governance even further. “[For a company to] achieve its objectives, the directors are the ones who keep a firm hand on the rudder, and they need to ensure that the company has a smooth path through any stormy waters. It’s all about making sure that the ship gets to its final destination,” she says.
“Management are busy dealing with the day-to-day tasks, but governance is all about how we’re going to achieve long-term sustainability [of the company].”
Part of good governance practice means directors must ensure all stakeholders in the company are treated equitably, whether that be through closing the gender pay gap, ensuring diversity on the board, or lowering ‘fat cat’ executive salaries.
“It’s all about how we use good governance to build stakeholder trust in the organization,” says Wood.
The issue of governance will only become more important in the current business climate, where companies expand and become ever more global each day. “Companies are growing and they’re becoming so important. The impact that they have on us is becoming bigger, the impact they have on the planet is becoming bigger,” continues Wood.
She describes the links between E, S, and G as “a three-way conversation we can have between governance of organizations, the environment and social impact.”
Good governance for all
In response to this growing challenge, Wood helped establish the MSc Governance course at the University of Lincoln. Designed to suit the needs of full and part-time students, the postgraduate degree covers modules on business ethics and organization, board effectiveness, finance, law, and teams and leadership. There is of course a central module on governance which studies the topic’s importance across all sectors, from health services to sports, and the program is keen to emphasize throughout the importance of cybersecurity as a notable challenge for businesses worldwide.
The profile of the student body is diverse, from recent graduates in finance and law to those already employed in governance and wishing to learn more. Graduates have gone on to jobs in governance in equally diverse fields, from TikTok to the United Arab Emirates police force. The very existence of the program exemplifies the growing demand for, and interest in, governance professionals.
Outside of further study, Wood says there are easy ways for a company to improve their Governance practice. In the UK, the Corporate Governance Code and, for businesses worldwide, the United Nations Sustainable Development Goals (SDGs) are obvious reference points for consultation. As good governance becomes an increasingly important corporate responsibility, business seminars on the topic are becoming more frequent. The University of Lincoln is itself launching the governance series, online sessions led by experts which aim to generate a wider understanding of the topic.
“[Governance] is not about short-term profits, and it’s not about quick wins for investors or directors,” adds Wood. “We really need to think about it in terms of what the organization is doing to create long-term sustainability in their organization.”
Consumers have as much power as institutional investors in this regard, especially with the public becoming more discerning as regards corporate responsibility in all aspects of ESG. While listed last in the ESG acronym, in order to best serve shareholders, employees, and consumers, governance must top all companies’ list of priorities. If businesses want to achieve their environmental and social goals, they must implement good governance, as Wood warns: “History is littered with companies, and some charities and some sports organizations, who’ve been shipwrecked, to use my earlier analogy, by their poor governance habits.”