Roundtable discussion on the role of corporate governance

We team up with contributors based in Asia from PwC, Duff and Phelps and Reed Smith, for a roundtable discussion.

David Rimmer, Client Manager at Hawksford, leads the discussion that was originally published in the June 2016 edition of Acquisition International. The key themes included:

• How would you define corporate governance and why is it important today?
• What does corporate governance bring to the financial services industry?
• How does your company implement effective corporate governance?
• How does tax legislation impact upon corporate governance and cross-border planning solutions?
• What are some of the recent trends and developments in how to implement good corporate governance practices?
• What support is available to businesses looking to implement new governance statutes or looking to respond to allegations of wrongdoing?

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 "…Corporate governance is especially important in our region as there are many regulatory changes facing businesses in Hong Kong." - Denise Jong, Reed Smith, Hong Kong

 "…the governance role of the board and senior management is to play ultimate umpire, where need be, calling time or asking questions." - Sinyee Koh, Duff and Phelps, Singapore

 "…shareholders derive greater comfort over the quality of decision-making at a company with good corporate governance, as well as its continued compliance with legal and regulatory requirements." - Ng Siew Quan, PwC, Singapore

 "…the world recognises the importance of good governance for every aspect of a business' life cycle." - David Rimmer, Hawksford, Jersey

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Here is what David had to say:

How would you define corporate governance and why is it important today?
The world has changed significantly since the Enron Scandal in 2001. The Sarbanes-Oxley Act of 2002 started the charge to combat the issue of poor governance, weak internal controls and lack of auditor independence. Fast forward to 2016 and the world recognises the importance of good governance for every aspect of a business' life cycle.

There are three key stakeholders to a successful business; (i) long standing shareholders, (ii) happy clients and (iii) a professional workforce. A business with strong governance methodology will continue to attract these stakeholder groups to ensure business profitability, growth and survival.

What, in your view, does corporate governance bring to the financial services industry?
Corporate governance is important for any business and jurisdiction wishing to promote best practice of their services to clients. Jurisdictions accredited for their controls and governance attract clients, corporations and governments who want to be transparent and compliant.

When all finance centres and jurisdictions implement and follow good governance and controls, the world will become more difficult for criminals to engage in tax avoidance schemes or other criminal financial activity. This would ensure that all global financial services institutions would be on a level playing field, agreeing that only tax compliant structures are supported, and thereby working positively with governments around the world.

How does your company implement effective corporate governance?
Hawksford has embedded a strong compliance culture within the organisation. Corporate governance within our financial business is divided into two distinctive responsibilities. Firstly Hawksford has its own effective systems and controls; secondly, senior management take responsibility for corporate governance issues, by providing risk representation at board level. Examples include a formal escalation committee framework to ensure that the correct level of approval is obtained.

Any good business has extensive policies and procedures to implement proactive corporate governance. Hawksford's corporate governance strategy is built on compliance, internal policies & procedures, governance (our boardroom conduct), working with our regulator, and audit & risk. We follow an agreed set of Codes of Conduct and best practice, which have been designed around each strategic measure to ensure that Hawksford is best placed to protect our clients, our business and employees.

How does tax legislation impact upon corporate governance and cross-border planning solutions?
Businesses and individuals are becoming increasingly international and seek solutions which will allow them to work and live internationally, whilst keeping tight reigns on their assets. With this brings increasingly more complicated circumstances. Financial institutions have had to invest in internal processes to deal with the new reporting standards such as FATCA/CRS reporting, and are constantly reviewing and ensuring that efficient risk and compliance frameworks are in place.

Staying ahead of tax developments and what this means for structures and their administration is why it is important that clients choose directors for their businesses and wealth structures which are abreast of international legislation and policy, and always considering the wider and longer term implications.

What are some of the recent trends and developments in how to implement good corporate governance practices?
Good corporate governance practices involve collaboration between a jurisdictional business (internal) and its regulator (external). All businesses and jurisdictions must remain competitive to retain and attract new business. Over the past 15 years, we have seen how governments, as well as changes in legislation, have altered the mindset of global businesses to ensure that internal systems and controls, documentation processes, senior management responsibility and regulatory expertise have shaped the way a business conducts its affairs.

Clients are looking for security and confidentiality when handing over their wealth to a trusted adviser or fiduciary service provider, and therefore businesses must be able to demonstrate discipline in this area. Jersey law is constantly amended to ensure that our industry and our Codes of Practice deal with financial crime effectively.

We have seen recently that more and more financial institutions are being fined for financial wrongdoing. Our industry is fully aware of anti-money laundering legislation and other anti-financial crime laws, which help us work with our regulator and financial crime partners. Our regulator's Codes of Conduct policies[1] ensure that we implement and constantly monitor best corporate governance practices when working with our clients and regulator.

Finally, what support is available to businesses looking to implement new governance statutes or looking to respond to allegations of wrongdoing?
There is plenty of support in the marketplace for businesses wanting to adopt best governance practices and there is no excuse for a business not to upgrade its corporate governance policy and procedures. The regulator of any jurisdiction will be more than happy to share its expertise about corporate governance regulatory reform and best practice.

Businesses should employ qualified experts to build an internal corporate governance framework and have healthy communication with its regulator and auditors for on-going independent reviews of a business's systems, controls and processes. Once a business adopts good governance reforms and announces this as part of its mission statement, the business will be recognised as a key contributor to the economy. This will attract like-minded employees wishing to grow the business and clients will be happy to be part of a company with strong governance attributes.

If a company raises its bar beyond reproach, there is less chance for a company to be challenged for wrongdoing, and as a result the business will be better placed to provide the client with improved confidential services.

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1. Jersey Financial Services Commission

2. Link to the Guidelines