Focus on governance `bigger picture` - ACCA

Government needs to show stronger support for voluntary measures which improve corporate governance rather than impose a legislative mandate, according to the ACCA (the Association of Chartered Certified Accountants), a partner of the Finance Indaba 2017.

"ACCA supports proposals to strengthen accountability and transparency. From our work on governance and corporate culture we are convinced that the best approach to achieving these outcomes is through providing support for companies who create a workplace which integrates employees and stakeholders in a way which means everyone supports the delivery of business goals.

Excessive focus on prescriptive legal measures on corporate governance not only risks introducing burdensome change for its own sake, but can end up masking the very problems they seek to resolve, as firms seek technical compliance rather than reform," says ACCA's Head of Corporate Governance Jo Iwasaki.

Iwasaki highlights several areas where ACCA believes the government should focus on "the bigger picture" in improving organisational outcomes instead of overly-specific policy interventions:

Executive pay

  • ACCA maintains that the two fundamental issues are the link to pay & performance as well as companies not considering pay & employment conditions of employees. These issues require organisations to take a transparent approach which secures buy-in from shareholders and employees, yet there is no evidence that government mandate proposals will provide any clear benefit to organisations which are not already well-run and accountable.Giving employees a stake in the performance of their organisation is the first steps towards better integrated organisations.

Stakeholder voice

  • Stakeholder panels can be a way of doing this, but mandated proposals for workers on boards or similar do not guarantee diversity of representation
  • ACCA supports measures to increase the transparency of company pay policies through a voluntary approach, but the benefit comes from an institutional commitment to clear communication
  • The communicability of company pay policy is arguably as important as the pay policy itself - pay-ratios and performance-related rewards need to be framed as part of a clear, transparent narrative to stakeholders

Iwasaki adds that corporate governance policies should focus on specific problems rather than a generalised approach,

"Government should not resort to a one-size-fits-all approach to corporate governance codes which are unlikely to address malpractice by a minority of large public and private companies. Corporate governance policies are not a silver bullet to solve issues such as mismanagement, a lack of financial discipline or poor decision-making.

Indeed, many organisations including private companies have already voluntarily adopted best practice principles of corporate governance regardless of legislative requirements to do so."