By JOHN CARVER and MIRIAM CARVER   

GOVERNANCE and management are fundamentally different, but the
difference has not been widely understood.

This has led to an unhappy circumstance that has much to do with
the mediocrity of governance in general as well as a tendency
for members of corporate boards to see their job as operating as
if they are super-managers.

Here are a few ways in which governance differs from management.

Governing boards have authority as a group and exercise it over
the CEO, who is accountable to the board for company
performance. Managers have authority, usually, as individuals
and exercise it over groups of individuals. Accordingly,
governance can be seen as management upside down.

Because governance authority is in the group, boards cannot
delegate, supervise, coach, or evaluate subordinates in the way
that makes sense in management.

The board must give the CEO instructions that have been agreed
by the whole group (or whatever part of it must agree to achieve
a passing vote).

Accordingly, the flexibility and involvement seen in management
relations with subordinates cannot be duplicated in board
relations with management, especially if clarity of board
direction is to be achieved.

Further, because wielding group authority requires great
discipline, boards are more prone to being managed by their
subordinates than managers ever are.

Defaulting on their challenge of group responsibility, boards
gravitate toward the comfort of having a single boss over the
group.

Commonly, the boss over the board turns out, paradoxically, to
be the CEO!

Board leader and management leader are very different roles. The
board's CGO (chief governance officer, normally the chairperson)
has only as much authority as the group grants, so he or she is
a servant-leader rather than an authoritative one.

On the other hand, the CEO actually has authority over the
staff, not subject to their granting or retracting it. Because
the CEO works for the board, the CGO has no authority over the
CEO.

Therefore, the board's leader- unlike the staff's leader - has
no line authority.

It has long been recognised that the skills needed to lead a
board successfully are not the same skills as needed for the
chief executive role.

Because the chief executive role is seen as more central to
company operation, it is common for a CEO - when also appointed
as chair - to bring to that combined position behaviours that
are not best for developing strong group authority and
responsibility.

The board links the organisation to its ultimate source of
authority.

Although management connects an organisation to its customers,
suppliers, and other stakeholders, boards are the sole link to
that very special stakeholder group - the shareholders. The
board is owner-representative.

Authority that exists in "owning" can be passed into the
organisation only via the board.

Hence, the flow of legitimate authority goes from shareholders,
to board, to management, so that no one in the organisation has
any authority at all unless the board has granted to the CEO
sufficient authority to allow further delegation and
decentralisation.

Consequently, the board has accountability for all corporate
achievements and behaviour.

Governance accountability is always greater than management
accountability, for management is accountable for itself and the
board is accountable for both management and the board itself.

For many companies - except those that are held by a very small
group of owners - the shareholders may be a group that is more
distant, numerous, and often more diffuse than the management
group.

In those cases, the board works for a largely absentee boss,
whereas managers live with the bosses almost daily.

The stage is set for boards to be able to get away with sloppy
work for a long time.

The incentive for board members toward excellence is weak
compared to the incentive for managers.

Governance is a subcategory of ownership, not a branch of
management.

Contrary to ordinary belief, governance is not best
characterised as management writ large so much as an extension
of ownership in microcosm.

For that reason, boards should maintain more intimacy and
discourse with shareholders than with managers.

Boards, then, should see themselves as a special case of owners,
not a special case of managers.

The board role is not to participate in, assist, or
trouble-shoot management, but to define and demand success.

Governance is not an instance of management one step up, but
rather is an instance of ownership one step down.

Corporate boards have not only the opportunity to be
authoritative, independent, and informed shareholder activists,
but the obligation.

Management is undefined until governance defines it. The only
reason for management to exist is to fulfil the dictates of
governance.

In other words, management is the dependent variable, so it is
illogical to examine or evaluate management until governance has
spoken.

A board does not exist to help its management; rather,
management exists to, on behalf of the board, achieve what the
board has decided shareholders should receive.

In that sense, it is healthier for boards to conceive of
managers as their instruments to achieve shareholder value,
rather than as themselves as managers' consultants.

Management technology is more advanced and researched than
governance technology.

The most powerful and accountable job in the organisation, that
of the governing board, is the most primitive - a formula for
mediocrity at least and disaster at worst.

Governance has been a stepchild in organisational research and
conceptual development, while development of one aspect or
another of management has soared ahead.

Management thinking has grown and developed by leaps and bounds
over the past few decades, while development of systematic
thought about governance has been virtually non-existent.

The Policy Governance model is an attempt to bring governance up
to and beyond the level of management sophistication.

Dr John Carver, whose international consulting practice is based
in Atlanta, and Mrs Miriam Carver will be in Kuala Lumpur to
present the Policy Governance Model on Sept 6 & 7. For details,
call MIM Customer Service at 03-2165 4611, e-mail
enquiries@mim.eduor visit our website www.mim.edu