In the world of cryptocurrencies, the word “governance” typically refers to a project’s method for paying employees and contractors – proposals are put forth by community members, voted on by the community, and then governance-designated funds are allocated accordingly. Governance usually stops at this point … until the next vote, that is. This begs the question – “Should we demand more from cryptocurrency governance?”
The answer is a resounding, “YES!”
In truth, the allocation of resources is only a fraction of what the word “governance” entails, and governance does not exist without a governance framework.
What Is A Governance Framework?
A governance framework is the structure of an organization, shaped by the goals, strategic mandates, financial incentives, and established power structures and processes of the organization. These frameworks institute the authority that presides over compliance, risk, legal, finance and audit matters, and also define how boards will oversee risks across all regions and businesses.
In developing a governance framework, a company must balance competing goals (such as the pursuit of growth and the preservation of assets), define responsibilities, and allocate resources for the implementation of governance. A governance framework evolves with the business and should be shared with all community members.
How Does A Project Build A Governance Framework?
The key take-away today is that there are four major components to a governance framework. These components include: Structure, Oversight Responsibilities, Talent and Culture, and Infrastructure. Focusing on these four key components will allow for smooth communication, transparency, decentralized decision-making, and the building of business, as well as blockchain, foundations for long-term growth.
1. Structure
The governance framework offers boards a way to articulate the oversight process, engage management in communication about governance matters, and learn where governance activities occur in the company.
- Outlines board and management committee structure, mandates, membership, and charters
- Establishes design of governance framework
- Delineates organizational structure, reporting lines, and relationships
- Highlights roles and support functions
2. Oversight Responsibilities
- Outlines types of committees and associated responsibilities
- Specifies functional accountability for day-to-day management across communities and channels
- Delineates board and management approved policies
- Supports delegation of authority, including reporting, escalation, and veto rights
3. Talent and Culture
- Aligns governance with operating and community principles
- Articulates core beliefs and culture
- Highlights characteristics of risk
- Outlines leadership succession and development responsibilities
- Aligns performance and responsibilities to compensation and incentive plans
4. Infrastructure
Addressing complexities inherent in the governance of multiple businesses across a global organization requires coordinated action and the consideration of local businesses, customers, compliance, legal issues, and bagholder needs.
- Establishes design and content of policy manuals and associated procedures
- Outlines type and frequency of internal reporting and communications
- Defines scorecards, measures, and metrics to track performance
- Aligns technology and governance needs
Now what?
If you’re holding an altcoin, ask the team what their governance model or framework is and where it can be viewed. If they don’t have this plan in place, suggest they act quickly to implement one and refer the team to this blog post.
Thanks for reading!