Thoughts on corporate governance

Guest blog by Kirrie-Anne Griffith, a chartered member

In October 2020, the FRC published a discussion paper, A Matter of Principles – The Future of Corporate Reporting with the aim of encouraging better, more transparent, annual reporting.

Reading this got me thinking about the importance of corporate governance.

Have you read it yet? You have until 5 February 2021 to respond.

What is good corporate governance? 

What’s the first thing that springs to mind when you’re asked the question: ‘What is good corporate governance?’ 

Personally, I think of an organisation that shares my values, treats me fairly, is transparent and has a leader that I trust. Is that a fair expectation or is it a ‘castle in the air’ wishlist? Perhaps an organisation that ‘saintly’ would be hard to find. Also, is it that organisations aspire to?

The aim of most organisations is to meet their stakeholder expectations (profit, market size, reach, impact, outcomes, reputation etc), so is it reasonable to ask them to put values, leadership integrity and transparency first? I think so, and I think that there is a growing opinion that this is exactly what organisations should be aiming for. 

Stakeholders generally want to be able to trust a company to deliver against their expectations, whether that be to deliver a profit or charitable aims. Good corporate governance helps to build that trust and provides a framework against which an organisation can be measured.   

The FRC defines good governance for listed companies in the UK Corporate Governance Code 2018 (which also applies to Euronext Dublin listed companies) and large private firms in Wates Corporate Governance Principles. UK central government define good governance for their departments, and aspects of local authority governance are defined locally. The charity sector and the social housing sector also have a good governance code.

In my view, there are themes running through these and the following are key:

• Values: An organisation should have clear values which encompass how the organisation wishes to be regarded. These can be both internal behaviours and external aims, such as corporate social responsibilities or building green credentials. They provide an expectation of how the organisation should be behaving.
• Integrity: An organisation must behave in an honest, straightforward manner. The ‘tone at the top’ of the leadership team provides the direction and their behaviour guides the behaviour of the organisation, and its culture.
• Scrutiny and challenge: An organisation should be open to scrutiny and challenge through its governance structure. This includes having independent non-executive members on its board, and creating the oversight board committees, such as remuneration, nomination, audit and risk, which allow independent thought and challenge to be made on the organisation’s executive decisions and direction. Other oversight activities include statutory audit, internal audit and regulators.
• Transparency: An organisation needs to transparently report its corporate governance activities, including its performance against its values, as well as its progress against achieving external social corporate responsibilities/behaviours. These are often reported in the annual report.

So how can I, as an Internal Auditor, contribute to helping my organisation implement and maintain good corporate governance? 

First and foremost, I can seek to live the organisation’s values, demonstrate integrity and contribute positively to social corporate responsibility activities. Whether it’s going as far as climbing Everest for charity or  recycling a plastic bottle.

In addition, as an auditor, I am perfectly placed to provide assurance over the organisation’s corporate governance activities through activities in the audit plan. Whether through dedicated audits or as part of all audits.

How will you make a positive contribution today to good governance?