Human Resources Governance and Compliance: Introduction and Overview

Abstract

Already before the crisis of the financial and economic markets, topics such as “good corporate governance,” “corporate social responsibility,” or “compliance” have been on their way up. The crisis accelerated the necessity for companies to deal with these issues. More than ever, companies are measured by the legal and political system, the media, and many other social stakeholders as responsible subjects that are expected not only to act compliant but also to act ethically legitimated.

In this context senior business leaders start to realize: people are the most important asset of each organization. Performance or underperformance, motivation or demotivation, orientation or disorientation can decide on the success or failure of an enterprise. Furthermore, personnel costs are in many industries often the single largest cost effort for an employer.

For all reasons mentioned above, organizations should have an effective control instrument in place to steer on the one hand their most precious resource (the people) and on the other hand to control major expenses.

To have a working HR governance structure in place helps to align human resources management with an organization’s overall strategy and its vision, mission, and values; to treat employees fairly, consistently, and in compliance with the law; to identify best practices; and finally also to control expenses and risks.

Having effective HR governance structure in place means also to create orientation by providing rules, regulations, norms, and standard operating procedures related to people management. In the consequence a proper HR governance structure can even impact the way an organization does business and makes decisions at the highest levels – right up to and including its top management.