What is a Code of Governance?
What is a Code of Governance?
A Code of Governance is a set of values and principles intended to guide and inform the way organisations are managed and conduct their affairs. It is also intended to serve as a standard and measure of performance to guide members of governing boards, and those who carry responsibility for governance.
Frequently, the principles, values and objectives of a code are embodied in a Board Charter, to which each serving member is required to subscribe.
Some codes are embodied in laws, regulations, and rules and their application is compulsory. The message of such compulsory codes is often characterised as: ‘Comply, or else!’ where failure to comply results in negative consequences, which may involve penalties or sanctions. In a serious case, non-compliance can lead to the personal liability and culpability of board members.
There are also other kinds of codes, whose message has been characterised as: ‘Comply, or explain!’ Such codes are not enforced by law or regulation, but they can still entail negative consequences for non-compliance such as, for example, the loss of benefits (e.g. tax exemption, or the loss of funding eligibility, or preferred beneficiary status).
There is a third kind of code which is entirely voluntary, supportive, and self-imposed. Such a code is not subject to official oversight, or enforced by law, nor is it enforced by the threat of penalties or sanctions. The purpose of such a code is to encourage and empower, rather than to regulate, sanction or impose.
