A recently published report by ACCA looks at the interrelation between businesses and society over the years and the importance of good corporate governance.
The Association of Chartered Certified Accountants (ACCA) believes that society determines businesses longevity and companies are to adopt critical methods of thinking. However, the examination of ongoing and emerging debate on corporate governance does indicate that its purpose may not be as simple or singular. There appear to be conditions that people expect companies to meet in achieving their long-term prosperity – a concept that this Tenets of good corporate governance report explores.
The report is centred around five recurring global themes:
- The relationship between companies and society
- Diversity and balance
- Enabling an effective board
- Executive remuneration
- Gatekeepers of corporate governance
These themes, both individually and taken together, conversely demonstrate that building sustainable businesses relies on society. This report aims to help businesses to examine their vision and strategic direction in a broader context, which will in turn allow their companies to achieve long term growth. Notably, some companies are breaking the existing organisational boundaries of best practice which, combined with a change in public perception, should raise the standard of practice over time.
The focus of the corporate governance debate is shifting: from an emphasis on compliance with processes and procedures to the outcomes of applying them, says Jo Iwasaki, Head of corporate governance at ACCA. She said that a common theme across the report is the need for companies to think deeply about their business model and how it may look in five, 10 or 20 years’ time. Companies need to achieve their long-term business purpose, but this must also involve envisaging where the society is going, and how they fit with the vision. Businesses need to realise the importance of a motivated and engaged workforce and positive relationship with their environment.
“All organizations in both public and private sector should incrementally inculcate and apply these tenets of good corporate governance to contribute in building a great society that will benefit all global citizens. ACCA and its members across the globe is well positioned to partner with policy makers, institutions similar to Development Partners and Institute of Directors and other Professional Accountancy Organizations to influence and empower directors to accelerate application of these tenets with the aim of creating long term value that will contribute in ending extreme poverty and boosting shared prosperity especially for the bottom 40% of the global population. This should include engaging in smart and innovative sustainable capacity building initiatives to specifically attract, equip and offer opportunities to the youth to serve in Boards,” said Patrick Kabuya FCCA, Senior Governance Specialist at the World Bank Group.
We solicited further insight from Professor Mervyn King, also a CFO Awards judge, and the international expert on corporate governance. He said all businesses exist in the triple context of the economy, society and the environment. Good corporate governance is about considering the outcomes that a business model has on its surroundings, and the positive role that it can play in creating the long-term health of the company, he believes.
“I am glad to see global organisations like ACCA engaging with this important issue and hope that business leaders and decision-makers consider and embed the tenets of good corporate governance across their organisations.”
Tenets of good corporate governance is the latest report in ACCA’s tenets series, which also includes the tenets of tax, business law and corporate reporting.