Guest insight

All about the "G"

Many companies struggle to adjust to the dramatic societal and economic impacts of Covid-19. Stefan Björkman, CEO of the Finnish cultural foundation Föreningen Konstsamfundet, argues that governance practices is one of the key deciding factors determining how well companies and societies weather storms like the current one.

Writing down thoughts at the very moment history most likely takes a turn is a risky endeavour. One might underestimate the change and look ridiculously complacent overnight. Or err in the other direction and come across as a hysterical alarmist. Or by refusing to be emotional and just comment facts seem cold and indifferent to suffering. It is truly difficult to find a suitable tone and a resilient theme. In addition, it is cumbersome to express thoughts that are still taking shape. So bear with me.

Over the last two years I have participated in a number of discussions on ESG. My contribution in those discussions was rather boring. I only had one point to make. You could call it a conviction. Some would label it a compulsion.

In each discussion I repeated this: the order of the three letters in ESG is wrong. It should all start with the “G”. If you do not have good and reliable governance in place, you do not have the means to deliver on the “E” and the “S”. Nor can you be a good steward of any of the resources you are in charge of. Simply put: For any investor good governance is a prerequisite for all value creation.

Experts will argue that their own particular domain is the key to value. “It’s the strong brand!” “No, it’s the culture and the people!” “No it’s the disrupting technology!” “Above all, it’s cash flow and solid finances!”. All these experts are partly right but in my opinion, they are like the group of blind men describing an elephant in the ancient parable.


Blind monks&elephant

"Blind monks examining an elephant" by Itcho Hanabusa. Illustration from Buddhist parable showing blind monks examining an elephant. Each man reaches a different conclusion based on which part of the elephant he has examined.


The stress test that the covid-19 crisis now constitutes forcefully drives home my basic point. In the great laboratory the world has become, this is becoming more and more obvious. Only the most resilient will thrive. This is particularly unfair to some. If you are in the process of transforming, a shock like the current can hit you particularly hard. Sometimes timing really is everything.

Good governance is the underpinning that ensures that the brand, the culture and the talent, the technology base, the supply chains and the finances are managed well. This does not give you immunity but it helps you to both react and recover. It ensures that buffers have been maintained.

One invisible force that good governance creates is trust. If you are predictable and people can trust you, you will have buffers of goodwill in an abundance. It builds the very resilience that gives you the means to react and implement change in an orderly fashion.

Finally, a much larger point. The covid-19 crisis is a tough challenge for the governance of companies but also for communities and nations all over the world. Good and consistent governance is boring but it creates value on all levels. A lack of it creates headlines and brings to mind the old Chinese curse: “May you live in interesting times”.


(Photo: Ukiyo-e eprint by Hanabusa Itchō (1652-1724) available from the United States Library of Congress's Prints and Photographs division under the digital ID cph.3g08725)