How to Report Corporate Governance

Include subheadings such as financial assets, customers, vendors and intellectual property in your corporate governance report.

Corporate governance is a set of best practices followed by companies in the day-to-day running of their business. Corporate governance is also commonly referred to as "business accountability" and "corporate social responsibility." After the Enron debacle, pressure has been growing on corporations to exercise due diligence, control reckless risk taking, establish a code of conduct and exhibit ethical behavior. Corporate governance reporting includes presentation and disclosure in the areas of financial reporting and performance evaluation.

Instructions

1. 

   Use generally accepted accounting principles to prepare financial statements.

   Prepare a corporate governance report, and break it down into categories. As outlined by PricewaterHouseCoopers, common categories include but are not limited to market overview, strategy and structure, managing for value and performance. Outline critical information under each heading in a way that gives an integrated view and understanding of your business from top to bottom.

2. 

   Highlight management's ability to understand external drivers.

   Include information on competition. Outline macro environment issues. So if you produce oil and environmental regulations are currently being considered under the climate change bill, then outline what it means for your profitibility. Is it more taxes? How much is this likely to erode the bottom line?

3. 

   Disclose steps your company is taking to meet new challenges.

   Question the quality of information your report is providing. Does it reflect your organization's understanding of political, social and regulatory changes taking place every day in the outside world? Report not just your understanding of these external drivers but also the impact they will have on your business and your preparedness to meet the changes.

4. 

   Is a department responsible for managing and mitigating outlined risks?

   Talk about the strategy and structure of your organization. List organizational goals and objectives.

   Outline your risk categories. Are your risks legal or related to natural disaster or to the environment?

   Answer questions around clarity of the chain of command in your organization. Are there any overlaps? Do your managers have the required authority to accomplish tasks? Corporate governance reporting seeks transparency and answers to questions like these.

5. 

   Outline the long-term sustainability of your business through its wealth distribution activities.

   Include yardsticks other than economic ones. Social and environmental issues are beginning to increasingly impact performance. For example, during the 2008 financial meltdown, hefty employee bonuses and incentives raised an alarm among taxpayers whose money was used to bail out banks and automobile companies. Does your company have a management policy on remuneration?

6. 

   Talk of steps taken to increase shareholder confidence and ensure future investment.

   Lay down a framework of evaluation for all your categories and their subheads. What are the critical elements needed to succeed? Examine the company's structure to assess accountability. Can you pin down responsibility in case there is an issue in the future?

7. 

   Are you monitoring subsidiaries and affiliates?

   Bring forward your connection to the outer world and how your management information systems operate. Does your reporting reflect the true market value of your business? Is your report reflecting internal reality or are you window dressing?

References

• Ernst & Young
• PricewaterhouseCoopers
• U.S Corporate Governance