Report Synopsis

Agribusiness Governance - Finding the Green Zone

Tom Skerman

  1. Corporate governance has grown in prominence in recent decades to the point that it is promoted as a default business practice. This has more recently translated to a belief that all businesses should embrace good governance. In other words, corporate failure is often closely associated with poor governance, resulting in the widespread assumption that good governance is therefore a pre-requisite of corporate success.
  2. Traditional corporate governance represents an ecosystem of rules, tools, influences and activities that collectively operate to direct and control an organisation.
  3. While there is no single accepted theoretical base for corporate governance, one - Agency Theory - which seeks to address the risks arising from a separation of ownership and management - overwhelmingly dominates practice and education. However, the governance needs of the bulk of our SME agribusinesses are not satisfied by an Agency Theory approach: a. Governance as a means of Control: Strike one! SME-Agribusinesses are generally owned and operated by the same people or group, often a family, where Agency theory adds little or no real value, resulting in “management processes on steroids masquerading as governance.” b. Governance as a driver of Strategy: Strike two! “Culture eats Strategy for breakfast.”
  4. Green-Zone Governance – the role of Service: An opportunity to re-calibrate the approach to Agri-SME governance based on Resource Theory, which seeks to bolster the capability, networks, outlook and expertise of the business and business owner as a whole.
  5. In a family business, genuinely fair outcomes are realistically few and far between – which is why a commitment to a fair process is so important, and why Service-focussed governance can help.
  6. Green Zone governance assumes you already have control over your own organisation, and that you have the culture you need to win. If you have neither, introducing a formal system of governance is the least of your problems. But project governance might help get you on track.

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