Defining governance is easy enough. On its website for the United Nations Global Compact, the United Nations (UN) defines it as “the systems and processes that ensure the overall effectiveness of an entity—whether a business, government, or multilateral institution.” In the business world, this means board processes and stakeholder relations. As an example, we need look no further than the governance guidelines of our companies and stock exchanges. Nations, too, have governance codes that receive revisions from time to time. (See, for example, the recent revisions to the United Kingdom Corporate Governance Code which were recently announced by the Financial Reporting Council.)
But what exactly is global governance—and what does it mean for boards of directors? For decades now, scholars and pundits alike have been using the term, but definitions vary.
An authoritative definition comes from the UN itself, which wrote in a 2014 report that “global governance encompasses the totality of institutions, policies, norms, procedures, and initiatives through which States and their citizens try to bring more predictability, stability, and order to their responses to transnational challenges.” (A transnational challenge would be something like the global impact of the European General Data Protection Regulation, which was the topic of a recent NACD FAQ.)
The same UN report questioned how effective corporations have been in fostering global governance, accusing them of “lack of representativeness, accountability, and transparency.” In other words, the report said that boards can do more to represent, address, and disclose global concerns.
Historically, this has been quite true. In fact, four decades ago when NACD was established, corporate governance was merely a national matter. With the exception of anti‑bribery laws such as the Foreign Corrupt Practices Act—which jolted boards into supply-chain awareness—global issues were not on the minds of most US boards. Our very name, the National Association of Corporate Directors, spoke volumes. Like many of our fellow institutes around the world, we did not specify which nation we represented; we assumed that anyone who might join would be from our own country.
Setting aside our provincial past, let us not ignore the progress that has occurred since then, and NACD’s role in it.
- In 1999, the Organisation for Economic Co-operation and Development (OECD) published the OECD Principles of Corporate Governance (subsequently updated in 2004 and 2015). All 29 OECD member nations approved these guidelines, which are now considered a global standard; they are currently endorsed by the G20 nations, as well. NACD’s own longtime advisor, the legendary Ira M. Millstein of Weil, Gotshal & Manges, along with his colleague Holly Gregory (now with Sidley Austin), played a major role in developing the guidelines.
- In 2004, NACD cofounded the Global Director Development Circle with five other leading director institutes—from Australia, Canada, New Zealand, South Africa, and the United Kingdom—to share information and tools for director education. We were ahead of our time and the initiative foundered, but success would ensue.
- In 2012, the founders rebranded this initiative as the Global Network of Director Institutes (GNDI). The founding members, convening in Wellington, New Zealand, were the same group of six director institutes, plus representatives from Brazil and Malaysia.
- In 2015, NACD and the GNDI cohosted the first-ever Global Cyber Summit, supported by KPMG, AIG, and the Center for Audit Quality. This was global governance at its best. After all, cybersecurity epitomizes an issue of concern to directors all over the world—and one that demands collaboration and cooperation across borders. We built it, but would they come? The answer was yes. We welcomed delegates from a variety of countries, including a large contingent from Thailand. When I saw that directors would travel halfway around the world to a cyber event, I knew that global governance had arrived.
- Our most recent Global Cyber Summit was held in Geneva in April, as described in a blog from our very own Katie Swafford, associate editor of NACD Directorship and editor of NACD’s BoardTalk blog.
- And last but not least, on June 27, GNDI held its annual meeting in Bangkok. Representatives attended from most of the GNDI member institutes, which now number 21. NACD’s director of research Friso van der Oord represented us, as the group continued its work to develop a new global survey on governance practices, among other initiatives.
Global governance is real because our companies and economies will continue to grow more and more interdependent to achieve success. NACD is playing an important role in helping to shape global governance, and will continue to do so through its work with GNDI and by hosting events like the Global Board Leaders’ Summit.
I hope you’ll join us in building a better world by elevating board performance, wherever you are.