The focus of corporate governance is shifting from an emphasis on compliance with processes and procedures to the larger purposes and desirable outcomes of pursuing them, said a new report from the global association for accounting professionals.
The Association of Chartered Certified Accountants’ (ACCA) “Tenets of good corporate governance” report examines the interrelation between businesses and society, and the importance of good corporate governance in facilitating a positive relationship between them.
The report examines five key issues:
- The relationship between companies and society
Aligning the vision of a company with that of society will help that company to prosper in the long term. Aiming to be part and fulfilling the needs of a society will help a company to navigate its challenges and uncertainties and create value from opportunities.
Diversity and balance in the composition of the workforce are important all levels of the organisation. They are vital within leadership.
- Enabling an effective boardroom
Every board member should be accountable for enabling effective boardroom discussion, with the chair playing a critical role.
Any approach to the challenges related to executive remuneration must consider two discrete issues that underlie the pay debate--the mismatch between pay and performance and the increasing sense of inequality.
- Gatekeepers of corporate governance
The ‘gatekeeping’ of corporate governance involves more than just companies and their owners: the wider public and policymakers also play a role.
ACCA head of corporate governance Jo Iwasaki said, “A common theme across the report is the need for companies to think deeply about their business model and how it may look in 5, 10 or 20 years’ time. Companies need to achieve their long term business purpose, but this must also involve envisaging where the society is going, and how they fit with the vision. Businesses need to realise the importance of a motivated and engaged workforce and positive relationship with their environment.
“While the corporate governance debate has come some way over the last decades, many still see it as a compliance exercise. However, some companies are exceeding existing best practice which, combined with a change in public perception, should raise the standard of practice over time.
“Hopefully this report helps businesses to examine their vision and strategic direction in a broader context, which will in turn allow their companies to achieve long term growth.”
Professor Judge Mervyn King, internationally recognised expert on corporate governance, said, “All businesses exist in the triple context of the economy, society and the environment. Good corporate governance is about considering the outcomes that a business model has on its surroundings, and the positive role that it can play in creating the long-term health of the company.
“I am glad to see global organisations like ACCA engaging with this important issue, and hope that business leaders and decision-makers consider and embed the tenets of good corporate governance across their organisations.”
The London-headquartered ACCA is the global body for professional accountants, supporting 200,000 members and 486,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.