01 December 2003

Corporate governance

vnunet.com Corporate governance:

While the need for organisations to comply with legislation and laws has been around for some time, high-profile scandals such as Enron and WorldCom really caught people's attention.

Powerful images of suited company executives being led away in handcuffs induced a degree of panic. Corporate governance was pushed to the top of the company agenda, highlighting the seriousness of lapses, with no room for clemency over whether they were deliberate or accidental.

Compliance is now becoming a matter of survival for businesses, and a question of freedom for directors. But understanding what corporate governance actually means varies widely, depending on the business and its inclination towards compliance.

The CBI defines it as 'the system by which companies are directed and controlled'.

It states: 'Boards of directors are responsible for the governance of the companies and for setting the company's strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship.'

There are numerous regulations to which businesses must adhere if they want their data and processes to stay on the right side of the law. Sarbanes-Oxley is perhaps the most prominent piece of legislation so far.

It was introduced in the US last year, covering corporate governance, financial reporting and auditing requirements. While it is a US law, international companies with offices in the States also have to comply.

Other, perhaps more familiar, regulations with which businesses must comply include Basel II in the financial world, the Data Protection Act and the Freedom of Information Act.

And then there are new ones, such as the EU Directive on Privacy and Electronic Communications, which comes into force on 11 December.

In this Special Report, Computing examines how best to ensure your business complies with the law, and the positive impact governance can have on the day-to-day running of the business, if it is done properly."

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