March 13, 2014 Global Corporate Governance
Once upon a time a board was answerable to very few. Nowadays that has changed with shareholders, pressure groups, regulatory authorities and others increasingly working to influence and shape the role of organisations including the way in which they are governed. This creates dilemmas for board members who can be faced with conflicting demands from different bodies.
In a bid to cut through the conflict and add shape and clarity to corporate governance practices, the Association of Chartered Certified Accountants (ACCA) has launched a consultation into global corporate governance. Entitled ‘creating value through governance’ the consultation calls for feedback from the “global business community, accountants, policy makers, investor relations specialists, investors and shareholders.”
In the introduction to the consultation the ACCA says that studies have found that there is very little consensus about what corporate governance is for and this makes it difficult for bodies to assess the effectiveness or otherwise of governance practices. There is also a question mark hanging over the way in which effective governance correlates with profitability. Suggesting that a governance framework could sit within key three measures of performing, informing and holding to account the report asks a series of questions designed to clarify the base requirements for governance in a modern business context.
These questions range from the factual to the more subjective. So whilst on the one hand the report asks for ideas about ideal gearing ratios and performance measures it also examines whether risk management should be part of corporate governance. Other areas up for discussion include:
- Has corporate governance become too focussed on form and compliance at the expense of the quality and integrity of decision making?
- Should economic and other policies to promote growth attempt to encourage companies to create value rather than capture value that others have created?
- Is lack of trust a problem? What should policy makers, businesses, and investors do to restore trust?
Running to sixty-six pages the consultation is not a quick read but it does raise some interesting and thought provoking issues. In launching the consultation ACCA head of corporate governance and risk, Paul Moxey said “The paper argues that corporate governance is all about creating long term sustainable value, for business and for its stakeholders. Governance codes should be evaluated on how well they create this value for real economic growth. “