Introduction to Corporate Governance

Why is it important to embed culture in corporate strategy?

The FCA expects a company's board of directors to be ultimately accountable for corporate governance, including establishing purpose, values, and strategy, and promoting a desired culture. Good corporate culture not only reduces employee turnover but also drives better business, and investors see it as an important consideration in their investment decisions from a risk management perspective. Culture can be measured through various methods, including employee surveys, direct engagement, site visits, and unsolicited feedback. To ensure that there is no disconnect between incentives and desired behaviors, culture must be embedded in corporate strategy, which remains a challenging objective that internal audit reports often do not cover. 

What are some examples of evolving ESG disclosures, and how are they being regulated in the US and EU?

Some examples of evolving ESG disclosures include environmental, diversity & inclusion, and human rights disclosures. In the US, ESG disclosures have been voluntary to date, but an Executive Order on Climate-Related Financial Risk in May 2021 tasked the federal government with mitigating physical and transitional climate change risks. The SEC established a Climate and ESG Task Force in its Division of Enforcement, which is focusing on misstatements and material gaps in disclosure. In the EU, consistent rulemaking for a sustainability framework is developing rapidly since July 2021, and ESG metrics are required to be reported through the Sustainable Finance Disclosure Regulation, the Corporate Sustainability Reporting Directive, and the Green Taxonomy Regulation.

What is Anti-Corruption Compliance, and why do SMEs face challenges in setting up adequate ACC programs?

Anti-Corruption Compliance (ACC) involves designing systems to respond to the risk of corruption and has evolved from general codes of conduct to industry-specific controls aimed at preventing and detecting wrongful activity. SMEs face challenges in setting up adequate ACC programmes because the resources required to establish ACC programmes that are responsive to enforcement action may be significant.