The competitive lever of strong boards and good governance: today, more than ever, we need a firm set of hands at the helm of our organizations. So, do we have the right rules in place for governing the corporation? Are we selecting the right people? And are our boards structured for maximum positive impact?

• Author: Levy, Maurice
• Position: GOVERNANCE LEADERSHIP

ECONOMIC TURBULENCE. Deep cuts and falling forecasts. Faltering markets. Plunging revenues. Sharp new peaks of unemployment. As Europe and the world enter our fifth year of seemingly unrelenting crisis, with little visibility for the future in the medium term, the need for vision--for clarity and perspective; for steady and balanced leadership--could hardly be more obvious.

Companies, like fish, rot from the head down. Poor leadership at the top cascades through every level of management, and this decomposition accelerates at times of rapid change and sudden threats--such as those we're undergoing now, in 2013.

Conversely, good governance is every corporation's most powerful competitive lever. By ensuring transparent processes throughout all operations, it builds corporate reputation and confidence. Corporate governance is about creating the conditions for what every economic actor should seek: the long boom--long-term, sustained, nourishing growth.

Moreover, in a context of intense globalization, as the Internet helps every kind of business and political issue go global but government largely remains a local (or at best regional) affair, corporations are becoming the only truly global actor. This magnifies their responsibility, and therefore the impact of their governance. It makes good corporate leadership a challenge that can benefit--or damage--an enormous number of communities.

So do we have the right rules in place for corporate governance today? Are we selecting the right people, and are our boards structured for maximum positive impact--so that our CEOs can receive appropriate guidance and our shareholder meetings become forums for genuine and constructive dialogue?

"A genuine leader is not a searcher for consensus, but a molder of consensus," said Martin Luther King Jr. Because of its key role in supervising and setting the framework for a company, it is crucial that the board's authority be acknowledged to be greater and more solemn than that of management. For this, the choice of corporate board members is absolutely vital. But first, before the members are selected, two questions should be answered, and they go deeper than they may seem: what is the board's ultimate goal--who does it work for?--and who sets its rules.

A shareholder-only model?

The first fundamental question of corporate governance is whether or not it is guided exclusively by the interests of shareholders. There is of course a fiduciary responsibility for the board to act in the shareholders' interest, and indeed a moral one, for their financing ensures the dynamism (and sometimes the survival) of the company. But if this is the board's only goal, all the mechanisms of management will be shaped to maximize share value, in whatever time frame is deemed relevant.

This ignores what I would argue is the broader and more important point. A corporation is in a sense a living organism. It has to adapt, shift, and take on new elements. Its sustained existence is an important goal. Many stakeholders depend on the corporation--including employees, suppliers, clients, and the communities in which it operates. Working with this perspective gives the board a very different outlook. It can aim to foster great leadership and management that will create improvement for all those stakeholders.

Ultimately, of course, there may be no clash between the two approaches, because in the long term shareholders will be satisfied by sustained performance. But in the short term, there may be discordance between them. The...