ACCA, Ernst and Young discuss value of corporate governance

Wednesday, 7 May 2014 00:04 - - {{hitsCtrl.values.hits}}

During a recent visit to Sri Lanka Hemraz Hoolash, Council Member of ACCA, met with EY Sri Lanka to discuss the values that corporate governance could bring to organisations. He commenced by explaining that corporate governance was the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company’s relationship with its all stakeholders such as its customers, management, employees, government, and the community.

Hoolash said that today, good corporate governance is globally accepted as being fundamental to an organisation’s competitiveness, growth and sustainability. There is great attention on boards of directors to discharge their duties with high ethical values and accountability in their commitment to good governance practices. Strong business ethics, sound policies and procedures, effective and efficient monitoring systems are considered as the main ingredients of good corporate governance system. He added that ACCA’s view is that there are three complementary main purposes of corporate governance. One was to ensure the board, as representatives of the organisation’s owners, protect resources and allocate them to make planned progress towards the organisation’s defined purpose. Next was to ensure those governing and managing an organisation account appropriately to its stakeholders and shareholders. Hoolash also spoke about the six key principles laid out by OECD, which were, to initially protect and facilitate the exercise of shareholders’ rights. Secondly it was to ensure strategic guidance of the company, the effective monitoring of management by the board. Thirdly it was to have timely and accurate disclosure made on all material matters. Fourthly to recognise the rights of stakeholders and encourage active co-operation. Next to have an equitable treatment of all shareholders and finally to promote transparent and efficient markets, that be consistent with the rule of law. Internal governance He also touched on internal governance which he said encompasses the system of policies, processes, rules and by-laws created by a company’s directors for the business to follow. It includes the reasons for which the company operates and the roles various stakeholders play in pursuing and achieving those goals. It should be appropriate to the nature, scale and complexity of the institution. He said it was also important that ethical practices be woven into the culture of each organisation. To ensure these take place, boards, management and shareholders need to be trained in governance and risk issues and how to manage them. He added that accountants play an important role in such a scenario. They should be gatekeepers and reputational champions and provide transparency in reporting and support internal integration and adherence. Accountants should also bring their regulatory knowledge and industry standard experience to their clients to drive through best practice. In addition they should have professional rigour and integrity and help the company and the board to prepare for change. “Most recently, ACCA has developed its competency framework, an online tool which defines the competencies, knowledge and skills covered by the ACCA Qualification to address these factors. On the development side, ACCA has an ethics and professionalism module in its qualification,” said Hoolash. He also pointed out that corporate reporting was a primary means by which boards account to shareholders and others on how they have stewarded the company and that quality financial reporting and auditing are essential for good governance. In conclusion, Hoolash said: “It all comes down to corporate responsibility. Many would agree that work still needs to be done to strengthen the corporate laws in many countries so that corporations can be compelled to conform to internationally accept corporate governance standards. However, regulation is by far not the only answer to this problem. The work of accountants is crucial to effective governance, especially in relation to its traditional focus on financial performance and accounting integrity. There is no doubt that a strong, expert accountancy profession can improve the application and understanding of effective corporate governance, whatever the sector or size of business.”