Corporate governance and rising global concern
The recently past and current turbulence being witnessed in global markets/economies have further reinforced and continue to reinforce the message that governance of organisations, especially financial institutions, should always aim at protecting the interests of all stakeholders. Perhaps, for sustainability, investment, development and/or socio-economic well-being.
At the Institute of Directors (IoD)’s evening with the top management of the global accounting body- the Association of Certified Chartered Accountants (ACCA), in Lagos, the topic resonated again.
The Chief Executive Officer, ACCA Global, Helen Brand, said the accounting body, with presence in 185 countries, has witnessed time and time again what happens when effective, transparent and accountable governance is neglected, hence it is imperative to re-echo the need for virtues and the implications of vice.
Bringing the discourse closer home, she asserted that corporate governance continues to be crucial for the health of the Nigerian banking industry.
“Financial failures, fraud and questionable business practices do very little in boosting investor confidence,” she said.
But speaking on the role of professionals in the global, Brand noted that as a membership body that has spread in more countries than any other, the association is aware that the perceived strength of accounting and auditing standards play a crucial role when global investors are considering which markets to invest in.
Against this backdrop, she said, is the reason ACCA believes that improved disclosure, both mandatory and voluntary, is one of the few sustainable means of attracting liquidity and a sure way to manifest corporate governance.
“Timely and credible disclosure of company information tends to promote investor confidence and attract additional listings. This then broadens the benefits to the domestic economy.
“In principle, disclosure also serves to reduce the cost of capital by reducing the unreliable information, especially in developing countries with high standards of market conduct,” she said.
Noting that the responsibility of ensuring greater disclosure falls on the chief executives and chief financial officers, she charged them to enhance corporate governance, accountability and business success.
She also noted that with risk continuing to be an important subject, as well as in the mix, fresh thinking is required if a company’s governance and risk management are to be strengthened.
She recalled that earlier in the year, the accounting body hosted an important thought leadership conference in London on the same issue, looking at four main areas- creating value through governance; risk reporting; challenging corporate behaviour and accounting for uncertainty.
“One of our key aims was to encourage better understanding by boards, executives and decision processes. The key outcome from the event was that corporate governance is vital to societies that depend on businesses to create economic wellbeing.
“76% of those who attended the conference were either in agreement or strong agreement with the idea that creating sustainable value should be the overarching purpose of corporate governance,” she said.
The ACCA chief cited Mr. Mark Wearden, board consultant and senior lecturer at the University of Lincoln as saying: “It is about how we get board and senior management to engage in value”, adding that a “one-size-fits all” approach to corporate governance is not the solution either.
Aligning the topic with the operations of Small and Medium Enterprises, she said that their needs are vastly different from those of bigger corporations.
While in larger organisations’ corporate governance is primarily tasked with ensuring that management acts as shareholders’ agents, for SMEs it is mainly about improving business performance and managing risk.
She said that governments, advisors and other stakeholders need to realise that the challenge for SMEs is that established corporate governance frameworks have been largely developed with larger corporations in mind.
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