Governance Revolution

Deborah Midanek brought the idea of revolution in governance to life in her 2018 book on the Governance Revolution. It is a good history of the evolving forms of corporate governance over the 20th and early 21st centuries. It is also a good illumination of the limits of the command and control mindset trying to address the dynamics of change and the need for fundamental change at strategic points.

Covid-19, if it does anything useful, it will be in its wake, in the actions of those stimulated by the disruption to the global economy. Midanek is addressing the weaknesses of governance models at the detail level. Covid-19 in effect asks what is the use of governance?

The major economies will now become case studies in dealing with economic and healthcare trauma on a mass scale. It is clear there will be gold medal winners and there will be laggards and out and out losers. It is not clear why the gold medal winners won and the others were 'also-rans'. It is likely the winners were disposed to address the issue and not promote their agenda; but that is not obvious to everyone.

Several things are clear and apply generally to the governance models of advanced economies. No model got in front of the pandemic wave and all ended up chasing 'the curve'. Additional and new measures were needed to enable resources and processes to be created to deal with the pandemic. In some societies the response was very slow and in some cases is incomplete. Rescue initiatives focused on corporate sector primarily, and subsequently on small business and employees. Care homes were an after thought and in many cases a dumping ground for un-managed capacity issues with the health systems. It is not obvious every community of interest has been treated as effectively as others.

The expectation is that many jobs have been lost and are about to be lost. Many small businesses are also already gone and many more expected to go. Central banks make statements dominated by narratives about debt, GDP and deficits. Governments are left making promises about help and support but there is no 'magic money tree'.

Governance therefore was behind the pandemic at all stages. Governance is still behind the disruption wave as it is focused on the stock market primarily, not the real economy. Governance is reacting to the strategic destruction wave, a la Schumpeter, but playing no effective managerial role. We seem not to have leadership but rather administration of events and procedures.

Conversations with businesses reveal a lack of certainty about what is happening, how they will get through and if they will survive. Gut instinct is playing a large role in their commitment to stay the course.

If we learn anything let us learn the current concepts and practices of governance have been and are ineffectual; they are in my view detached from the dynamics of the real economy.

We need a governance revolution!