Corporate Governance

10 Practical Tips for Self-Assessment

Financial Institutions | Thomson Reuters GRC (Reprint)

June 10, 2016

Jigsaw Puzzle

Corporate governance is not just a regulatory necessity – it is a cornerstone of running a well-controlled business. UK and international regulators continue to focus on this area and more changes are inevitable with the introduction of the Markets and Financial Instruments Directive II (‘MiFiD II’) and the extension of the Senior Managers and Certification Regime (‘SMCR’) across the entire UK financial services sector.

These changes follow the significant strengthening of corporate governance arrangements and controls which many companies undertook following the financial crisis which began in 2008 and the implementation of the SMCR.

Corporate governance self-assessment checklist

Non-executive directors (‘NEDs’), compliance officers, company secretaries or legal counsels often wrestle with how to make governance processes pragmatic and practical. Below we explore ways of addressing those challenges.

1. Can you describe the culture of your firm? How can you demonstrate that the culture throughout your firm is as you believe it to be?
Embedding and protecting the desired corporate culture goes beyond just communicating cultural values. The Board and senior management need to demonstrate their commitment through action and seek evidence from their teams that they operate in an ethical manner, especially when faced with difficult commercial choices. Senior management should recognise and even reward employees across all levels of the firm, who demonstrate strong cultural values.

Enforcing consequences for behaviours inconsistent with a firm’s desired culture is also vital, especially if exhibited by middle and senior management. People follow the behaviours of their direct leaders. If there are inconsistencies between the messages from the top and how these messages are translated and demonstrated in practice by their department’s management, the desired culture will not work and disjointed micro-cultures will continue to flourish.

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