20 Practical Steps to Better Corporate Governance,
released Monday as the Geneva-based organization announced its formation at a press conference in Paris. The 26-page report [Read here
.] is written by world-renowned corporate governance expert Prof. R.I.” Bob” Tricker, author of Corporate Governance: Principles, Policies, and Practices
and founder/editor of Corporate Governance: An International Review
The report’s major themes center around improving corporate governance as the world emerges from the global financial and economic crisis by including input from the work of several corporate governance experts such as Sir Adrian Cadbury, head of the Cadbury Committee in the UK; Dr. John Carver, a corporate governance consultant in the U.S.; Prof. William Judge of Old Dominion University; Prof. Jay W. Lorsch of Harvard Business School; Prof. Christine Mallin of Birmingham Business School in the UK; James McRitchie, CEO of the Corporate Governance Network
; and Dr. Shann Turnbull, principal of the International Institute of Self-Governance.
“The organizers of the inaugural conference of the CSIA asked what are the corporate governance lessons from the global financial and economic troubles?” Tricker wrote in the report. “The focus, it was suggested, should not be limited to the governance of banks and other financial institutions, but should also consider the implications for the governance of all types of corporate entity.”
Among the 20 steps spelled out in the report, Tricker cites the work of such organizations as Organization for Economic Cooperation and Development (OECD), the SEC in the U.S., and the Financial Review Council (and the UK Corporate Governance Code). He points to four areas that needed attention the most: board practices, risk management, top-level remuneration (compensation), and shareholder rights.
The 20 practical steps for boards and companies are:
- Recognize that good corporate governance is about the board’s effectiveness, not compliance with codes.
- Confirm the leadership role of the board chair.
- Check that the non-executive directors the necessary skills, experience and courage.
- Consider the caliber of the non-executive directors.
- Review the role and contribution of non-executive directors.
- Ensure that all directors have a sound understanding of the company.
- Confirm the board’s relationship with executive management is sound.
- Check that directors can access all the information they need.
- Consider whether the board is responsible for formulating strategy.
- Recognize that risk governance is a board responsibility.
- Monitor board performance and pursue opportunities for improvement.
- Review relations with shareholders, particularly institutional investors.
- Emphasize that the company does not belong to the directors.
- Ensure that directors’ compensation packages are justifiable and justified.
- Review relations between external auditors and the company.
- Consider relations with the corporate regulators.
- Develop written board-level policies covering relations between the company and the societies it affects.
- Review the company’s attitude to ethical behavior.
- Ensure the company secretary’s function is providing value.
- Consider how the corporate secretary’s function might be developed.
The report also touches upon directors’ duty vs. legal liability, as McRitchie points out that directors and attorney had been moving toward minimizing future litigation while ignoring the more important duties.
“If they report only ‘known minimum’ liabilities, they risk violating Sarbanes-Oxley,” McRitchie wrote. “However, a ‘fair presentation’ could be used as evidence in court and raise possible settlement costs.”
In the report, Tricker wrote that, “we need to move, McRitchie suggested, from ‘don’t ask, don’t tell’ to a careful weighing of the evidence and accounting standards that provide for more in the way of disclosure.”
What’s incredible about the formation of the Corporate Secretaries International Association (CSIA) isn’t so much that it brings together some of the greatest corporate governance minds from 11 nations, it’s the thought leadership they produce.
In light of the belief that corporate governance failures helped lead to the financial crisis, the organization, which is supported by chartered or corporate secretaries worldwide including the Society of Corporate Secretaries and Governance Professionals in the United States, plans to use their research to educate directors and companies.
“Corporate governance is undergoing much questioning given the serious governance failings that contributed to and sustained the financial crisis,” Phillip Baldwin, CSIA president-designate, said Monday. “In response, we are creating a global professional organization – one building on the strengths of national associations that represent corporate secretaries, who are on the front line in helping companies implement best practice corporate governance.”
The group’s first research report,