At its most basic level, corporate governance is about ensuring that a company’s stakeholders (nowadays, not just shareholders) receive a fair return on their investment. It also seeks to ensure that companies comply with all relevant legal requirements and operate responsibly.
Corporate governance is a complex system that involves several key players. Central to that relationship is the Board of Directors. The board of directors is responsible for setting the overall strategy, monitoring the performance of the company, and ensuring compliance with relevant local and international laws and regulations. The board is elected by the shareholders, who have certain rights and powers in relation to the company. Other key stakeholders include shareholders, creditors, employees, customers, vendors and regulatory bodies. Shareholder activism is becoming a key topic these days.
At the heart of all good governance lies transparency. Companies that prioritise open and honest transparency in their operations build trust among all stakeholders. Transparent communication fosters a clear understanding of corporate objectives, financial performance, and decision-making processes. This transparency helps create an environment where stakeholders feel confident in the company’s ability to navigate challenges and make ethical decisions.
Because global organisations now rely heavily on technology, IT governance is becoming a framework that outlines how organisations should invest in IT initiatives to meet specific business goals. It goes beyond mere reporting, compliance and cybersecurity, offering a structured approach with defined leadership, organisational structures, and processes. For marketing organisations, this means ensuring that IT strategies support and enhance the achievement of business objectives using technology.
Make Way For Marketing
Marketing is too important for the future of every company, and boards of today cannot overlook a review of the marketing of the organisation. While for many companies, marketing may not share the spotlight at board meetings, boards of today need to make as sophisticated a discussion of marketing as they discuss strategy.
One does get the impression that marketing receives less attention at board meetings, and board committees concern themselves with matters other than marketing. A closer look at some publicly traded companies suggests there are relatively fewer directors who have had hands-on marketing experience, and even fewer participate in board committees focused on marketing. Given this lack of experience and attention, boards have difficulty providing effective governance of the marketing function.
Marketing has built fortunes and depleted others, so it does require that directors closely look at and scrutinise the firm’s marketing function and initiatives. In most of the global case studies that talk about the collapse of companies, shortcomings in financial governance are often mentioned. One would love to hear and read of cases where marketing governance has failed. While weak or absent marketing governance may not topple a company immediately, over time, the effect may be no less damaging.
Stakeholder value can be erased when marketing results are below analysts’ expectations or when marketing fails to achieve results that need to be better than industry averages. Some of the biggest culprits of stakeholder value destruction are pursuing quarterly revenue targets by tweaking pricing and sacrificing margins. A concept one would call “mortgaging the future” to ensure better optics and PR of good results now.
Overlooking Marketing Can Hamper Growth
One of the reasons that oversight of marketing could often be overlooked is that maybe directors lack adequate experience in understanding the nuances of the marketing function. The majority of the board may be paying more attention to the areas which are in their realm of expertise, such as finance and acquisitions. Directors may end up taking comfort in the dollars and cents aspect of whatever marketing says they do or will do. Having marketing expertise at the board level impacts revenue growth and a more nuanced understanding of marketing expenses.
Growth is paramount to any organisation. This is true of private companies, listed firms, startups and even nonprofits. Beyond the fiduciary duties, growth in awareness of an organisation or its brands, market shares, attraction, and ultimately revenue generation, is a key concern for most companies. The truth is that one can only get this focused perspective from board directors who have a long-standing professional experience as marketers with successful histories of managing the demand generation and high revenue growth cycle. Yet, the irony seems to be that the function best trained and practised at driving growth is rarely found serving on the majority of boards.
Throughout the 2000s, organisations have been faced with financial crises of ever-growing proportions. These have led to numerous regulations like the Sarbanes-Oxley Act, tighter mortgage and lending controls, and stress testing of big banks and financial organisations. All this has rightly culminated in a focus on financial concerns in board meetings. This has also led to the requirement of directors with more expertise in understanding finance, balance sheets, expertise in HR, and now expertise in technology and ESG. One does hope that it will not take a spectacular marketing fiasco to see marketing brainpower recruited in larger numbers into these ranks
Make no mistake. Directors with marketing expertise also need to prepare for board participation and membership. That means gaining experience to understand board responsibilities, financials, balance sheets, HR, IT, ESG and fiduciary roles. They will need to step outside social media tactics and the touchy-feely aspects of the new look and feel of a rebranding exercise.
In a time of customer-centricity, and with the next digital trend seemingly a click away, marketing expertise would add increasing value to corporate boards. Brand is the single most important investment one can make in any business, be it the company itself as a brand, all of the brands it handles, or even an individual as a brand. Therefore, ignoring or not understanding marketing is like opening a business but not wanting to tell anyone correctly about it.
