The corporate governance movement is a global phenomenon and is resulting in the emergence of a new global business environment. More than ever before stringent and defined corporate governance surrounds boards and their responsibilities. It applies to all companies not just those in the financial services sector.
Since 2008 and the global financial crisis that accompanied it, corporate board membership in the financial services industry has had an even greater significance than before. Beyond the fiscal, social and corporate responsibility that goes with sitting on a board, it has become very clear that it’s not about being a “yes man” or “yes woman.”
An enhanced level of scrutiny is being applied to corporate boards and their activities in today’s regulatory environment – whether or not the directors realize it. Before making appointments to the board, company CEOs and other leaders must recognize the risks they are asking potential board members to assume and make sure that candidates are fully informed that they may be held accountable for the financial institution’s decisions.
As a CEO, it is expected to advise and educate corporate directors on risk management, financial crime, money laundering, terrorist financing, and other related laws and regulations. Experience shows that accountability can be a terrifying concept for board members. Furthermore experience has shown that great companies have high cultures of accountability.
Responsible, accountable corporate governance is key to an organization’s success. If you’re a member of a corporate management team, a director on a corporate board, candidate for a board membership, or even a corporate compliance officer, there are important things you must know about corporate governance and its impact.
What is corporate governance?
Corporate governance is the framework that supports the efforts of an organization’s executive management and board of directors in doing the right thing regardless of the challenges they must address or decisions they must make. Again good corporate governance reduces opportunities for unpredictable decisions, provides a system of checks and balances between management and the board, and increases transparency in an organization, all of which help prevent the consolidation of authority in the hands of an individual.
How to achieve responsible corporate governance
Among other things, a quality corporate governance framework includes educating board members on such key issues as money laundering, terrorist financing and compliance. It also involves assuring active committees at the board level that include audit, compliance and ethics and establishing an agreed-upon level of risk appetite.
If you were the board chairman, you will want to be active in selecting and approving board members who you believe will be active participants, make meaningful and appropriate contributions, and be willing to assume the risk and accountability of a position as a director.
...To be continued
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