April 13, 2024

Styles Of Leadership

Try Styles Of Leadership You Like It

The crucial nexus between leadership styles and Corporate Governance (CG)

6 min read

In the year the company I work for achieved its ISO27001 certification, during the closing session the Assessor emphasised the need for the entire management to remain vigilant and proactive. He warned that some institutions struggle to get recertified when their current certificates expire because they fail to build upon the processes and practices that led to their initial certification.

As a representative of management, I affirmed our commitment to not merely fulfil regulatory requirements for certification but to also embrace the principles and ideologies that lay a foundation for sustainable business practices and standards. Our goal was to ensure lasting profitability, benefitting not only our current stakeholders and society but also generations to come.

Over the years we have successfully obtained multiple recertifications, and each attempt has become easier due to our steadfast adherence to our promises. This achievement can largely be attributed to the style of leadership demonstrated within the organisation. The enabling environment provided by this leadership style has allowed the managers responsible for information security policies (an essential aspect of our corporate governance) to operate smoothly with unhindered control.

Clause 5 of the ISO27001:2013 summed up the role leadership plays in ensuring good corporate governance (CG) in any aspect of a corporation’s operations. In part, it states that leadership roles include directing and supporting persons to contribute to the effectiveness of the information security management system”.

In today’s ever-evolving corporate landscape, the adoption of sound CG practices often stems from the compulsion of regulatory bodies. Regrettably, some institutions merely comply with these practices without willingly embracing their principles – perhaps to avoid being sanctioned. Extensive research reveals that non-regulated entities, including certain SMEs, exhibit alarmingly low adherence to CG principles; thereby exposing themselves to potential risks and, in some cases, catastrophic collapse. It becomes evident that the core of this predicament lies deeply entrenched within the leadership fabric of these organisations.

Leadership and CG serve as the pivotal cornerstones upon which the long-term sustainability of corporate entities rest. An exquisite amalgamation of these two facets can elevate an obscure business into a trailblazing market leader, while a perilous alliance between them can culminate in the unceremonious downfall of even the most colossal institutions. An effective leadership approach steers the organisational ship toward a path that prioritises and upholds good CG practices over short-lived gains, thus paving the way to unparalleled prosperity for the stakeholders of these institutions.

Diving into the essence of CG, it represents a comprehensive system encompassing meticulously crafted standards, guiding principles and well-calibrated processes, which collectively drive firms toward generating sustainable value for shareholders and other stakeholders – all while basking in utmost transparency. It is worth acknowledging that at its very core an efficient leadership dynamic provides an empowering and fertile environment, fostering the thriving growth of good CG.

Undeniably intertwined, the facets of leadership and CG appear inseparable; and the defining characteristics of leadership styles either fuel the voluntary assimilation of CG practices or act as obstructive roadblocks, making CG practices mere ticked boxes to ‘fulfil all righteousness’.

One such leadership style is the renowned Autocratic Leadership, wherein decisions predominantly emanate from the singular vantage point of an authoritative leader, often with scant regard for the valuable insights and perspectives of others. In certain scenarios, this commanding leadership model may align harmoniously with the principles of CG, provided the leader’s inherent values exhibit a genuine commitment to adhering to the bedrock of established principles.

For instance, an autocratic leader who has high and unrepentant regard for doing ethical businesses with a high degree of integrity will engage his leadership style to ensure this value is driven down into the fibre of all the employees. Conversely, in the complicated maze of autocratic leadership style, the voices of employees and stakeholders may find themselves muted; leading to the unfortunate trivialisation of CG and relegating it to a mere superficial gesture devoid of profound commitment, such as projecting the culture of CG on marketing materials rather than in the fabric of the business’ day-to-day activities.

For instance, under CG guidelines, the risk and compliance manager – the custodian and implementor of an institution’s corporate governance system – is expected to report directly to the Board of Directors, with a ‘dotted reporting line’ to the company’s leadership. This measure aims to subject the leadership to control – a concept that often meets resistance in autocratic leadership styles.

To promote effective CG compliance and ensure proper oversight, it is essential that the responsibility for managing and controlling CG practices is entrusted to someone other than the company’s leader (CEO or MD). The development and grooming of future successors and subjecting oneself to the vital scrutiny of checks and balances, crucial attributes of good CG, often remain unattended in the realm of autocratic leadership.

For CG to be not merely embraced but intricately interwoven into the very fabric of an organisation’s existence, leaders must espouse an adaptive approach akin to an artistic fabric, skillfully piecing together the best elements from various leadership styles. The ideal leader deftly wields a firm and resolute hand when circumstances warrant, while seamlessly transitioning into the collaborative realms of democratic leadership when inclusivity and collective insights stand to propel the organisation’s vision toward boundless success.

At its core, the right leadership style acknowledges the indispensable value of employees’ commitment and buy-in, as silencing the voices of stakeholders – like the repercussions of autocratic leadership – remains injurious to the very existence of a culture of good CG. Cultivating an environment that empowers employees, granting them the autonomy to thrive, reducing excessive micromanagement, and sowing the seeds of a harmonious and positive work culture all bear witness to the profound impact of a well-crafted leadership approach on the blossoming of CG practices.

Democratic Leadership is a people-based type of leadership. We are reminded of the definition of democratic government from our elementary ‘government’ subject. Democratic government is ‘government of the people for the people by the people’. It is a style of leadership that values inputs from team-members toward consensus-building and decision-making. Although inputs from team-members are welcome, the final decision still rests with the one put in charge. Undoubtedly, this style of leadership comes with its own challenges such as a slow-paced decision-making process.

However, this slow-paced decision-making process may be positive toward development and implementation of the CG principles and standards. People tend to adopt standards and policies in which they participated in developing, rather than those that were forced down on them. This style of leadership ensures stakeholders’ buy-in of CG principles, which in turn simplifies their adoption in day-to-day activities. When employees participate fully in a decision-making process, although it could be prolonged, they will be intrinsically motivated to contribute to the organisation’s success.

Lastly, we talk about Transformational Leadership. Transformational leadership is adjudged the best of all modern-day styles of leadership. Transformational leadership focuses on the company’s future, happiness of the various stakeholders, and the strategic direction to get the company to its desired future.

Although they have their hands on the happenings in the company, they balance it effectively with ensuring every functional team is allowed a substantial amount of space and freedom to work. This leadership style does not focus on its own personal interest but on long-term interests of the firm, whereby corporate governance principles are on hand to help such leaders achieve this lofty aim. This includes not only growth of the corporation, but also the various stakeholders within and without the organisation.

Those within include the employees and those without include various stakeholders such as the market the company serves, shareholders, regulators etc. Their own success is achieved when the company’s objectives are achieved. The leaders in this category ensure that controls and laid-down principles work without undue interference, and they duly subject themselves to those controls.

They demonstrate true servant-leadership which leads the way in ensuring the right things are done, leaving no one with an excuse to deviate. They put on the autocratic leadership style hat in wielding the rod when there is a deviation from the laiddown standards within the organisation.

In conclusion, the interconnection between leadership styles and CG cannot be overlooked or over-emphasised. An astute leadership approach constructs the foundation for a corporate institution’s sustained and thriving prosperity. By wholeheartedly embracing the principles of good CG, not merely out of obligation but with fervour and under the guidance of effective leadership, an unparalleled legacy is forged. This legacy, in turn, bestows benefits upon stakeholders, transcending the constraints of time and leaving an indelible mark on the organisation’s journey toward excellence.

Disclaimer: The views expressed are personal views and don’t represent those of the media house or institution the writer works for.

>>>the writer is Executive Director, eTranzact Ghana Ltd. He can be reached via  [email protected], Cell: +233 244285147


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