How many times are we going to learn about another corporate misstep? The list of companies making headlines for the wrong reasons never seems to end —Wells Fargo, Volkswagen, Target, Toshiba, Experian, Yahoo, Weinstein, Wynn, Uber—just to name a few. What do all of these companies have in common? A lack of strong corporate governance.
Corporate governance can simply be defined as a framework of rules and practices by which a Board of Directors ensures accountability, fairness, and transparency in a company’s relationships with all of its stakeholders. This is simple and logical, and cannot be seriously challenged as an extremely important, if not mission-critical, objective. Yet, even today, many companies large and small do not walk the walk, or even talk the talk, of strong corporate governance.
It may be trite to say, but it is all so true, that real corporate governance begins with the “Tone at the Top.” The Board of Directors of an organization holds the power and has the duty to set this tone and, with that power, establish the culture of an organization. Culture is the true benchmark of what an organization is, what it represents as its values, and how it accomplishes its mission. Culture has now become a recognized asset of a corporate organization or, in far too many cases, a liability.
Great organizations can only be truly great when executing best-in-class governance. This requires mindful leadership from a proactive, intelligent, healthy, responsible, and accountable Board of Directors.
Today, regulators across multiple industries understand the benefits of strong corporate governance. As such, regulators are evaluating the companies within their jurisdictions from the perspective of corporate governance, both in hindsight following scandals and as added components of routine, proactive oversight. While federal regulators are reducing overall regulatory compliance, federal and state regulators are increasing the oversight of good corporate governance practices within the banking and other industries. Additionally, within the insurance marketplace, state regulators have similarly ramped up oversight on this important front.
Following the 2008 financial crisis, the National Association of Insurance Commissioners (NAIC) analyzed existing corporate governance regulatory initiatives and statutory requirements and identified a need to collect additional information from insurers regarding their corporate governance practices. Upon completing its study in 2014, the NAIC developed a model act and accompanying model regulation, known respectively as the Corporate Governance Annual Disclosure Model Act (#305) and Corporate Governance Annual Disclosure Model Regulation (#306). As of January 2018, nineteen states (California, Connecticut, Delaware, Florida, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Montana, Nebraska, Nevada, New Hampshire, Ohio, Oregon, Rhode Island, Virginia, and Vermont) have adopted the Model Act. Eleven states (California, Connecticut, Florida, Indiana, Iowa, Louisiana, Nebraska, Ohio, Rhode Island, Vermont, and Virginia) have adopted the Model Regulation as well. Thus, nearly 40% of all states have enacted laws for insurers on corporate governance.
For the full article, refer to page 6 in the Spring 2018 issue. https://www.airroc.org/assets/docs/matters/AIRROC_Matters_Spring_2018_Vol_14_No_1.pdf
