IIA: Feedback on OECD Principles of Corporate Governance

04 January 2015

The IIA supports the OECD’s efforts, which are intended to help governments and regulators evaluate and improve the legal, regulatory and institutional framework for corporate governance.

The current draft prepared by the Secretariat of the OECD Corporate Governance Committee incorporates insightful changes that reflect developments over the last decade affecting both the global corporate sector and capital markets. From IIA´s perspective, specific positive enhancements include:

• Allowing for "comply or explain" flexibility, which is consistent with other corporate governance codes (Paragraph 1)
• Including provisions for the concept of size and proportionality in applying any corporate governance framework (Paragraph 3)
• Recognizing the important and evolving role stock exchanges and markets play in an overall governance framework (Paragraphs 8-10)
• Addressing the important and increasingly influential role institutional shareholders play, and the criticality of their willingness and ability to participate in making governance structures accountable (Paragraph 45)
• Recognizing the important role proxy advisors play in influencing corporate governance (Paragraph 53)
• Addressing a "comply or explain" stance on separating the role of CEO and Board Chair.(Paragraph 90)

In addition, IIA sees opportunities to incorporate foresight into the Principles to reflect anticipated developments in the corporate sector and capital markets. These include:

• Providing additional attention to the call for corporate integrated thinking as a way to best benefit the investment community over the long-term. Manifested in the promulgation of integrated reporting, this would include emphasizing the importance of assurance on reported data
• Clarifying the both complimentary and separate roles internal and external audit have in providing assurance to the board and shareholders

The Principles developed by the OECD are essential to ensuring effective corporate governance and IIA believes strongly that internal auditing, operating in accordance with the International Standards for the Professional Practice of Internal Auditing, is a cornerstone of good governance. Given the relatively short time this exposure has been publicly available for comment, on behalf of IIA´s global membership and the internal audit profession as a whole, IIA respectfully requests an invitation to participate in a discussion to elaborate on how strong, independent and objective internal auditing is central to good corporate governance.

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