What is good corporate governance? Is it setting up punitive rules for misconduct? Or is it a holistic concept that adapts and changes to the times? And what is the legal department’s role?
The Association of Chartered Certified Accountants (ACCA) attempts to answer such questions in a recent report, “The Tenets of Good Corporate Governance.”
First of all, why this report, now? According to ACCA, it “sets out key issues for companies to think about when considering their long-term business model and strategy.’ Further, “It examines the interrelation between businesses and the context in which they operate.”
The interrelation is key. Scandal-ridden companies in the past have had exemplary written governance policies. But, for example, in Enron’s case, that didn’t prevent the gross underreporting of losses. As the authors note, good governance “is not a box-ticking exercise. It is instead a means by which organisations…may achieve their own purpose.”
The authors set up a few main themes, but the first one is probably the most provocative, yet obvious. “Aligning the vision of a company with that of society will help that company to prosper in the long term.” If you’re puzzled, consider this. In the wake of the world financial crisis a decade ago, corporate governance was couched in negative terms, of practices that should be forbidden. But the authors here say it should be viewed in a positive light, mission statements of how the company is going to take advantage of the talents of its people, technological advances and a supportive social and political structure to prosper. And its prosperity won’t be just for its shareholders and employees, but society as a whole.
We can’t summarize the entire report. Read it for yourself at the London-based group’s website.