A detailed examination of the fitness for purpose of existing corporate governance and risk management arrangements is launched today by ACCA (the Association of Chartered Certified Accountants).
Supported by ACCA’s Global Forum for Governance, Risk and Performance, the consultation, Creating value through governance – towards a new accountability, finds there is little consensus about what corporate governance is for, making it difficult to assess whether it is doing a good job.
The paper suggests the purpose of corporate governance should be to ensure companies create sustainable value and that governance practices should be evaluated on how well they achieve this purpose; it also advises that value should be considered in a wider sense than simply profit, and should consider societal and environmental value as well as economic value.
Seeking responses from the global business community, accountants, policy makers, investor relations specialists, investors and shareholders, the paper asks a series of questions, such as:
- Has corporate governance become too focused on form and compliance at the expense of the quality and integrity of decision making?
- Have current governance systems made it harder to hold people to account for company failure?
- What should policy makers, businesses and investors do to restore trust?
The consultation suggests ideas for a new accountability framework for corporate governance based on three measures: ‘performing, informing and holding to account’. The effectiveness of national governance codes and companies’ own approaches to governance in contributing to value creation can be assessed using the framework.
Paul Moxey, head of corporate governance and risk at ACCA, explains: '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.
'It suggests that a new conceptual framework, based on performing, informing and holding to account, could help to achieve this much needed value. We also need to address the culture and incentives that drive corporate behaviour, issues which have not been addressed fully.'
Paul Moxey concludes: 'We want wide feedback to this consultation, so we welcome responses from anyone interested in this area. After all, this is an issue that affects everyone. It has been written for those with an interest in the financial system, in the contribution that enterprise makes to economic growth and in what leads to market dysfunction – essentially, all of us.'
The consultation, the eight main questions ACCA is asking, introductory videos and other supporting material can be found via the 'Related Links' section, left of this article.
The consultation closes on the 31 August 2014, and will be debated as part of an invitation only ACCA conference on 28 March in London highlighting current projects as part of ACCA’s Risk and Reward theme.