Many of your clients operate companies. Do they understand the key governance issues relative to the operation of companies?
This can include:
- Workplace Health and Safety (WHS) issues – is someone responsible for implementing appropriate procedures?
- Is the company aware of the environmental laws and regulations that relate to their particular industry?
- What types of financial management systems have been introduced within the business, to monitor investments in debtors, stock, work in progress and liabilities owing to creditors?
- Are other directors aware of the severe responsibilities that they have, to ensure the company doesn’t trade whilst it’s insolvent?
The two main activities for directors could be defined as:
- Appointment of a Managing Director or a Chief Executive Officer (CFO).
- Setting the strategic goals for the company, in conjunction with the company’s management team.
Directors also need to assess the risk management strategies that have been introduced for the company. This can include items such as:
- Insurance – are the covers adequate for the business?
- Is the business aware of its potential problems under the Personal Property Securities Act (PPSA)?
- Are there processes in place to ensure an appropriate review is made of new customers, new agreements and new leases of storage facilities, to determine whether it’s appropriate for a registration to be made on the Personal Property Securities Register (PPSR)?
The director’s responsibilities also extend to ensuring job descriptions have been prepared for all positions within the company, especially the senior executives and that periodic reviews have been undertaken to ensure executives and team members are faithfully performing the duties that have been allocated to them.
Part of corporate governance is that directors meet on a regular basis. The directors’ meeting should be the focal point of a sound corporate governance system within the business.
Team members and management know that the Board is meeting on a regular basis, reports submitted to the Board and will be considered by them. It enhances the accountability and performance of executives and team members within the total company.
Directors also need to understand the financial accounts for the company. Accountants can play a major role in assisting in the mentoring of directors on the interpretation of financial accounts. Far too many directors don’t understand the financial accounts of their companies. This is one of the real corporate governance challenges faced by Boards of Directors.
Undertaking the Australian Institute of Company Directors (AICD) Diploma Course will give directors a clear insight into the interpretation and understanding of financial accounts, as well as a detailed overview of many key attributes of being a company director.
Small/medium enterprise directors need to be reminded from time to time that small and large companies are all governed by the Corporations Code.
Undertaking a review of a corporate governance strategy within a company is an important contribution accountants, offering a broader range of services other than just compliance, can make to the business health of their clients’ companies.
ESS BIZTOOLS supplies accountants with various articles and other material, relative to corporate governance issues, to assist accountants to deliver this type of service to their clients.
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