Changing the Board's Focus from Compliance to Entrepreneurship

Abstract

Increasingly executives and non-executives start to grumble about a governance system that forces them to spend all their time on compliance, risk management and proper reporting. In fact, the real task of a governance system is to foster growth. Good corporate governance contributes to growth and performance, both at the level of the individual firm and at the macro-economic level. However, to achieve the growth we want, we need to see corporate governance beyond the legal-audit approach that is dominant today. Corporate governance will have a more effective contribution to accountable entrepreneurship if a more comprehensive view is adopted on its tasks and field of operation different from the present reductionistic legal-accounting approach. Amongst others, a system of corporate governance has to address the psychological mechanisms at play in restricting the performance of the firm, for example dominant logic and satisfying behaviour. Also a system of corporate governance should be capable to apply multiple views on the firm, not just the perspective of the executives themselves. By applying multiple perspectives, non-executive members of the board, respectively the supervisory board (in jurisdictions like e.g. Germany and The Netherlands) can contribute to the entrepreneurship of the firm, without neglecting the need for proper accountability and compliance. The apparent contradiction between entrepreneurship and compliance can be bridged when a full view is taken at the question when is the board in control? Apart from the legal-audit view on in control nine other dimensions of control can be discerned, and should be taken into account. This paper elaborates a richer definition of corporate governance, takes a broader view on the functions of a system of corporate governance, redefines corporate governance from a single level issue to a multi-level system, elaborates on the different views on control in order to transcend the present dominant legal-accounting view to enable corporate governance what it is supposed to do: to contribute to the welfare of society.