Understanding the

key requirements for

effective Corporate
Governance

Jonathan Bowdler
Head of GRC @ ICT
Defining Corporate Governance?

Corporate Governance is the

system by which companies are
directed and controlled

UK Department of Business Innovation and Skills

The 4 Rights
Right Information

Right People

Right Time

Right Decision
 Example Corporate Governance Structure
External Audit Board
Committee

Remuneration Executive Officers Internal Audit

Committee Committee

Compliance
Credit Committee Risk Committee
Committee

Operational
Support functions functions
 Key Sources of Reference/Regulation
Europe / USA
 Communication from the Commission to the Council and
the European Parliament Action Plan: European
company law and corporate governance - 2012
 Significant changes in US corporate governance
requirements contained within the Sarbanes-Oxley Act –
2002
 Organisation for Economic Co-operation and
Development (OECD) Principles on Corporate
Governance - 2004
 Key Sources of Reference/Regulation
United Kingdom
 Cadbury Report (1992) subsequently taken forward by the
Greenbury, Hampel and Turnbull reports.
 The Corporate Governance Code originally issued by the Financial
Reporting Council in 2003 and most recently updated in September
2012.
 The FCA’s and PRA’s Senior Management Arrangements, Systems
and Controls (SYSC) section of the FSA Handbook. SYSC is applicable
to all regulated firms, not just listed firms.
 The Walker Review – A review of corporate governance in banks
and other financial industry entities. November 2009 report into
potential failings that led to the credit crunch.
 The Walker Review

A review of corporate governance

in UK banks and other financial
industry entities
 High level conclusions
Current arrangements are ‘fit for purpose’, however;

 Boards are not challenging enough

 An increase in Board oversight of risk management is
required
 An increase in Board oversight of remuneration
policy is required
 So what are the Compliance
Function’s responsibilities with
respect to Corporate
Governance?
 Is there a regulatory requirement?
 Code of practice or regulation?
o UK’s Corporate Governance Code
o US’s Sarbanes Oxley Act 2002
 Captured in some other way?
o UK’s FCA Systems and Controls Handbook
 Follow best practice!
 The Overlap
Sound Corporate Effective
Governance Compliance

Systems and
Controls Regulatory
Compensation expertise
arrangements Senior
Management
Responsibility

Documented Regulator
Committee Processes relationship
TORs
Effective MI
 Question

What are the key pragmatic elements

of ‘Good Corporate Governance?’
 Practical Steps
 Documented procedures
– Meet compliance requirements
– Clear lines of responsibility
 Consistent and clear Terms of Reference
– Quorum
– Levels of authority
 Minutes
– Structure
– Record keeping and review
 Effective management information
– Less is more
 Practical Steps
 Education and training
– Demonstrate the benefits
– Transparency
 Audited
– Compliance monitoring
– Independent review
 Ad Hoc system in place and understood
 Timing of meetings
 Remuneration
– Encourage the ‘right’ decisions
 Summary
 Corporate governance is about the flow of
information around the business for decision making
purposes.
 To work effectively, and improve decision making
within the organisation, the right information has to
get to the right people in a timely fashion.
 The structures of corporate governance and
compliance within a firm should be considered in
conjunction if they are both to be fully effective and
efficient.
 Summary
 Like compliance, responsibility for good corporate
governance lies with the board.
 Corporate Governance is a system, and as such
requires management and oversight if it is going to
be effective.
 It should be designed, implemented and reviewed in
exactly the same way as any other system.
 Whilst there may be a compliance requirement, the
rewards of effective Corporate Governance go
beyond simple regulatory compliance
 Final Conclusions
 Corporate Governance is probably the most
important system in your organisation
 Getting it right will have a major beneficial
impact upon your organisation and give you
sustainable competitive advantage
 The Compliance Function has an very
significant role, beyond simple regulatory
compliance, role to play.