What are the overarching principles of corporate governance?

Jo Iwasaki, Head of Corporate Governance, ICAEW

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ICAEW

We provide qualifications and career support to over 140,000 chartered accountants and 20,000 ACA students worldwide
Founded in 1880 World leader of the accountancy, finance and business profession Headquarters at Chartered Accountants Hall, London

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The ICAEW members in business

55% 80%
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of FTSE 100 companies have an ICAEW Chartered Accountant as chairman, CEO or CFO

of FTSE 100 company boards include at least one ICAEW member.

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The ICAEW charter

Public interest

Member interests
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ICAEW thought leadership

Finance Innovation Lab Sustainable Business Inspiring Confidence in Financial Services Market Foundations Crisis Without a Legacy? Audit Quality Forum Dialogue in Corporate Governance Finance Direction Making Information Systems Work

Information for Better Markets

re:Assurance

Towards a Better Tax System

Financing Change

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Dialogue in corporate governance

Project process ICAEW Corporate Governance Committee: including board members, investors, practitioners Engaging wider stakeholders, such as academics and regulators Facilitating on-going debate with other interested parties

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Dialogue in corporate governance

Five questions: New challenges What should companies be responsible for?

What are the overarching principles of corporate governance?

When is comply or explain the right approach?

How diverse should boards be?

Who should be covered by codes?

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Dialogue in corporate governance

Five questions: New challenges

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Background

Why are these questions important? Recent events triggered by financial crisis

Changes in capital markets

Challenges to companies

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What should good corporate governance achieve? the boards must be free to drive their companies forward, but exercise that freedom within a framework of effective accountability. This is the essence of any system of good corporate governance.
(from Cadbury Report, 1992)
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What are the overarching principles of corporate governance?

Four fundamental responsibilities

Achieving a business purpose Behaving in a socially acceptable way Meeting legal and regulatory requirements Stating how responsibilities are met

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What are the overarching principles of corporate governance?

How can these responsibilities help companies? To be agile and adaptable to their environment To identify new opportunities

To rebuild public trust

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What are the overarching principles of corporate governance?

Examples Executive remuneration Bank bailouts Short termism Aggressive tax avoidance

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What are the overarching principles of corporate governance?

How should the board lead the company? Satisfying a range of responsibilities Decisions to facilitate long-term success

Developing a sustainable business model

Going beyond compliance

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What are the overarching principles of corporate governance?

Overarching principles Leadership Capability Accountability Sustainability Integrity

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Characteristics of overarching principles

Linked to business purpose Related to outcomes

Focused on what is most important

Clear and concise

Durable
Widely accepted

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What are the overarching principles of corporate governance?

Guiding companies in the time of crisis

Having guidelines for difficult governance issues

Open and dynamic board processes Using judgement appropriately Promote a robust corporate culture

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Challenges to overarching principles

Following principles is not always easy because:

Subjectivity in concepts
Need to use judgement Explain why judgement is appropriate

Aspirational
Intended to continue improving governance
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For more information

ICAEW

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Thought Leadership

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Corporate Governance: Go to: icaew.com/newchallenges New Challenges

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Questions?
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