It’s easy to forget that the concept or meaning of the term governance is not clear to many, and not just among people outside of the boardroom. In part, this lack of clarity reflects established board practices that are primarily ‘review and respond’ in their design, rather than being proactive and forward-looking. And to some extent, confusion over the meaning of ‘governance’ is rooted in an unclear sense of what boards are actually supposed to be governing. This is a common(s) problem.

When working with boards and board members, one of my first challenges to them is to identify the drivers of success at their organizations and the elements that support those drivers. This sounds cliché, or at least it should, because the direction taken by many boards and board advisors after this point is usually quite standard and predictable. Rather than reviewing reports on successes and failures, the next step for a board needs to be identification of the commons among the elements that drive success. Commons, or common pool resources, are resources to which many have access and which, if not cared for, could be consumed and ruined by those same people. …

Board members, chief risk officers, and other key executives from 13 countries have issued guidance to boards of directors on how to best govern risk via specialized board risk committees.

As political and economic interactions become more complex, and as disruptive technologies and processes make innovation cycles massively shorter, boards of directors are paying more attention to risk. This week, the Directors and Chief Risk Officers group (“the DCRO”) published Guiding Principles for Board Risk Committees to help boards and those who depend on them enhance the risk governance practices of their organizations.

The guiding principles are based on the idea that all organizations must take risks to innovate and to achieve their goals. “Taking risk is in entrepreneurs’ DNA,” said Florence Anglès, Chief Risk Officer of REYL & Cie Ltd, an independent banking group in Switzerland. Getting the most out of an organization’s ability to take risk — its risk capacity — is enhanced by a board governance function that includes specialized focus on risk-taking. At the same time, boards have a duty of care that requires an appropriate framework be in place to ensure that such risk-taking is commensurate with their desired levels and expectations. “Having these guiding principles available is a great help to allow my organization make sure that the right oversight and infrastructure to measure and monitor risks at all stakeholder levels is in place,” said Maria Paula Calvo, Vice President Service and Global Technology and Operations Lead Mexico, for MetLife. …

Trustless or trusted? Skepticism over centralized authority, especially following the near-collapse of the global financial system in 2008 led to the development of “trustless” networks. One example is the blockchain behind Bitcoin, where anonymity and distributed record keeping were centerpieces of an attempt to remove the role of, and interference from, centralized control. In the ten years since the crisis, governance structures in this blockchain world have been built and are being re-invented, almost daily. …

Trust is a keystone to all good relationships — those between investor and the company in which the investment is placed, between creditors and the recipients of credit, between customers and businesses they patronize, employees and the workplace, suppliers and with whom they contract, and more.

Trust affects both our ability to engage in relationships and, in many cases, the cost of maintaining those relationships. Where there is a lack of trust, we substitute contracts, regulations, checks and balances, and intervention. Where there is substantial trust, on the other hand, we allow freedom to operate and to innovate. Trust is earned and can easily be lost. …

The most interesting debate in corporate governance is not happening in the boardroom or between activist owners and boards. Rather, it’s happening all across a field of public (aka “permissionless”) blockchains, as communities mostly made up of strangers rapidly realize they are stakeholders in multi-billion-dollar ecosystems. Acknowledged or not, these ecosystems are simultaneously experimenting with models to effect successful political, economic, and technological governance. Watching this play out is one of the most fascinating things I’ve seen in my career and it’s only just garnering mainstream attention.

Governance is about creating the framework within which goals and objectives can be pursued most effectively — building trust and fostering innovation, while acknowledging that it is not possible to maximize the latter without solidly establishing the former. Governance is also about allowing complex adaptive systems to evolve, but not allowing networks of connected people and technologies to become so dense that they invite what is known as complexity collapse. …