More needs to be done to make principles simpler and globally relevant says ACCA (the Association of Chartered Certified Accountants) in its response to the public consulation by the OECD (Organisation for Economic Co-operations and Development)
The corporate governance principles set out by the Organisation for Economic Co-operation and Development (OECD) have become too complex and too detailed, says ACCA (the Association of Chartered Certified Accountants).
ACCA, led by its Global Forum for Governance, Risk and Performance, responded to a public consultation by the OECD on its Principles of Corporate Governance, supporting the overarching aim to ‘contribute to economic efficiency, sustainable growth and financial stability’.
The Principles have a significant influence on the development of countries’ requirements and codes. The latest review, however, misses the rare opportunity to restructure into fewer high-level principles which are globally applicable and have a longer shelf life. These could be supported by more detailed and more regularly updated guidance on implementation relevant to different markets.
Adrian Berendt, chair of ACCA’s Global Forum for Governance, Risk and Performance and co-author of the consultation response, said: “We believe the overarching purpose of corporate governance is to ensure that an enterprise achieves its specified objectives, often creating long-term, sustainable value – for society and environmentally as well as economically. This statement could be made stronger in the revised Principles.”
“ACCA expected this revision to take into consideration corporate culture and was surprised that there were so few references to behaviours, ethics and public interest. These areas are challenging but should be addressed by the principles. They are part of leading thinking on corporate governance in light of recent crises and their importance is paramount” he said.
“There is increasing emphasis on ethical behaviour and culture in financial services, but OECD has missed the opportunity to address these issues in the guidance.”
The consultation response also details other areas for consideration:
- Risk governance, board diversity, disclosures across a number of governance aspects and accountabilities at board, board committee and senior management levels
- Business’s tax contribution
- The relationship with shareholders and the quality of information going to investors
- The role of audit committees
- Replacing ‘Comply or Explain’ with ‘Apply and Explain’
- Investor responsibilities and combining the Stewardship and Corporate Governance codes.
Adrian Berendt concluded: “ACCA is actively involved in the work of BIAC (the Business and Industry Advisory Committee to OECD) which directly influences the revision process and aims to make the principles as effective as possible. ACCA’s views align well with BIAC’s overall stance although we believe that this consultation must be seen as an opportunity to more significantly revise the structure and create more relevant, high-level principles that drive better governance across the globe.”
Read ACCA’s full consultation response at: http://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2014/december/cdr1329.html