The corporate boardroom in 2013 is under pressure to change. That pressure is coming from multiple different directions. Basic questions have been raised about the evolving role of boards, at a time when scandal and perceptions of corporate opportunism have resulted in a loss of public trust in the business community. In a related vein, traditional notions of fiduciary duty are increasingly being questioned, both in regard to how effective boards really are in safeguarding equity shareholders, and in regard to whether boards really ought to try to balance a broader set of stakeholder interests. Meanwhile, many of the more specific facets of board responsibility are shifting as well. Compliance, reputation risk, ethical tone, and organisational culture are becoming more salient as concerns for corporate directors, even as they wrestle with how to deal effectively with any of these things. In a related vein, one question that comes up often, in conversations with directors, is what are boards actually supposed to do, in order to better address compliance and reputational risk?
On compliance in particular, there are two interesting trends in play. On one hand, there has been significant legal and regulatory movement over the past few decades, in the direction of placing more responsibility on boards to oversee the compliance function. In part, this has occurred through major appellate court cases like Stone v. Ritter, which have affirmed that board fiduciary duties encompass some responsibility for compliance oversight, and for making sure that the corporation has a meaningful compliance program. It has also occurred through revisions to the Federal Sentencing Guidelines on organisational crime, which provide for more lenient treatment to corporate offenders when related standards for effective compliance programs have been met (e.g., ensuring a direct channel of reporting access between compliance officer and board). Collectively, these policy developments have put pressure on boards to be more engaged in compliance oversight, while also providing a pathway for them to follow in carrying out that oversight.
See full Article: http://www.rand.org/commentary/2013/05/01/FW.html
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