ICAEW says that everyone from shareholders, employees to the public should be able to understand what good corporate governance is. Its latest thought leadership paper ‘What are the overarching principles in corporate governance?’, encourages the board to focus back to a set of simple, but fundamental principles.
The paper outlines five overarching principles which are short, purposeful and aspirational and should apply to any company. They remind corporate boards and their stakeholders what corporate governance should look like if a company is to achieve its business purpose and meet its fundamental responsibilities. The principles also help us respond to new challenges and maintain stakeholder confidence in business.
The principles are:
An effective board should head each company. The Board should steer the company to meet its business purpose in both the short and long term.
The Board should have an appropriate mix of skills, experience and independence to enable its members to discharge their duties and responsibilities effectively.
The Board should communicate to the company’s shareholders and other stakeholders, at regular intervals, a fair, balanced and understandable assessment of how the company is achieving its business purpose and meeting its other responsibilities.
The Board should guide the business to create value and allocate it fairly and sustainably to reinvestment and distributions to stakeholders, including shareholders, directors, employees and customers.
The Board should lead the company to conduct its business in a fair and transparent manner that can withstand scrutiny by stakeholders.
Jo Iwasaki, Head of Corporate Governance at ICAEW said:
Good governance is about having a robust corporate culture, it is not simply a matter of compliance with regulatory requirements. The board will need to think how key governance principles apply within their organisation and how they can be implemented.
The governance principles we have identified should be sufficiently high level to make sense more widely. This must be a plus, because companies operate globally today and these principles should guide companies in dealing with new and difficult issues consistently across the organisation.
To download the paper www.icaew.com/challenge2
This is the second paper from ICAEW corporate governance of a series of five called Five Questions, New Challenges arising from changes in capital markets and how they affect the foundations of existing corporate governance frameworks. The first ‘What should companies be responsible for?’ can be downloaded at www.icaew.com/challenge1