03 April 2003
Unless finance professionals provide better decision support for the board and other governance committees, Higgs's efforts to improve board effectiveness and ultimately trust in the capital markets will not be fully effective, according to a report published today by CIMA, the accounting body focused on accountants in business. The Role of the Non-Executive Director: Making Corporate Governance Work has been sent by CIMA to the UK's top 1000 finance directors.
CIMA believes that the messages communicated to investors and other stakeholders should reflect the messages communicated to board members. This framework of transparency – a continuum between internal and external reporting – should be the cornerstone of good governance.
Following the Higgs review into the role of the non-executive director (NED), which calls for a widening of the gene pool of NEDS, financial training and more open communication with shareholders, this latest report from CIMA addresses the crucial part of the corporate governance jigsaw which has not been widely addressed: the provision of high quality and timely information to the board. Only with relevant and complete information and analysis can boards run effectively, with good strategic decisions leading to improved business performance and competitive advantage.
Charles Tilley, Chief Executive, CIMA, said:
"One of the most important points in the Higgs review refers to the importance of good quality information. A board is powerless to make good decisions without complete information and analysis of business drivers, key performance indicators and risks, both financial and non-financial. It is business accountants who have a crucial role in getting these right."
He added:
"A fundamental contribution of the finance professional to board effectiveness is the provision of relevant and timely information. This information is especially important for NEDS who generally have less involvement in day-to-day business operations. They can only comment on, and make decisions about, those matters that have been brought to their attention. Any gaps in the information they receive will result in poor decision-making."
He continued:
"Both boards and investors need to understand the implications of decisions. Good information and good governance enable boards to take good decisions, and enable investors to better assess the future prospects of a business."
The report goes on to conclude that:
"The established role of finance professionals is to ensure that the board has a clear picture of the financial health of a company. But they should also be extending the horizons of decision-making to encourage boards and investors to take a long term approach. Of course, accountants in business cannot do this alone – they will need help from other market participants, particularly investors."
CFOs and FDs aside, accountants in business – at whom this guide is primarily aimed – need to understand the inner workings of the boardroom. But, in order to fulfil their role of providing information to the board, they need a comprehensive understanding of how that information is used. This report provides an overview of recent corporate governance developments, as well as some pointers as to how accountants and finance professionals can contribute to the effectiveness of their boards.
ENDS
For more information please contact Lottie Muir, PR Manager on +44 (0)20 8849 2407 or email lottie.muir@cimaglobal.com.
The Role of the Non-Executive Director: Making Corporate Governance Work is available to download free from the CIMA website.
CIMA members are Accountants in Business. We represent financial managers and accountants who work in industry, commerce, not-for-profit and public sector organisations. Our key activities are related to Business Strategy, Information Strategy and Finance Strategy. CIMA members are not trained in audit.
CIMA's focus is to qualify students, support members and employers, and protect the public interest. We represent the voice of over 77,000 students and 60,000 members in 154 countries.
CIMA's focus on management functions makes us unique, and we are internationally recognised as offering the financial qualification for business.
CIMA is 'rapidly becoming the chartered qualification of choice' according to recent independent research*, and we work with leading employers in the UK and around the world to train and qualify financial managers. We pride ourselves on the commercial relevance of our syllabus, which is continually enhanced to reflect the latest developments in business. In an age of growing globalisation and intensified competition, the Chartered Management Accountant is fully prepared to meet the need for timely and accurate financial information.
Our members and students work across all business sectors at all levels throughout the world, demonstrating the flexibility of the qualification.
