OECD reviewing corporate governance
The OECD is reviewing corporate governance in the light of the financial crisis. They commissioned Richard Anderson & Associates to report on the link between risk management strategies and remuneration policies, and the role of the board of directors in establishing and monitoring risk management strategies and remuneration policies.
“This paper portrays a picture of Corporate Governance in The United Kingdom, the United States of America and France in the banking sector being severely challenged in an extreme Financial Crisis that has seen household banking names run into trouble, some to fail and others to be taken into various degrees of national ownership. Corporate Governance is stretched to the extent that it is distressed and has been unable to cope with the demands placed on it. The rationale for saying that it is stretched is as follows:
- Corporate Governance is (almost) voluntary;
- Investor pressures are fierce, leading many businesses to undertake risks that simply are not in the best long term interests of the organisation;
- Non-executive oversight is stretched in that directors only have a limited amount of time to devote to the organisation, but almost unlimited responsibilities;
- External audit is stretched to a point where the degree of reliance that is placed upon it is out of proportion to the amount of work that actually goes into it;
- Internal audit is struggling, largely because many internal auditors are not the beneficiaries of the regard that they are owed;
- Obtaining assurance from regulators, financial analysts and rating agencies cannot be comprehensive;
- Which leaves boards with dependence on management including the risk management team, and General Counsel (or the Company Secretary).
This report, which contains a series of recommendations can be downloaded by clicking here. Or a summary report can be found by clicking here.
It should be stressed that this report does not necessarily represent the views of the OECD, its staff or the OECD Steering Group on Corporate Governance.
The OECD are continuing their dialogue in Corporate Governance: click here for more details.
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For more insights on the issue of risk management and corporate governance as well as the impact on business continuity,be sure to read: A Risk Management Approach to Business Continuity: Aligning Business Continuity with Corporate Governance.
