IMA is one of the five original sponsoring organizations of COSO (Committee of Sponsoring Organizations of the Treadway Commission) and has had a significant role developing the COSO’s Internal Control Integrated Framework and the Enterprise Risk Management Framework. Each of these frameworks have moved over the years from being focused on financial reporting to a broader focus on improving organizational management and value creation.
In January 2024, COSO released a Request for Proposal to develop a Corporate Governance Framework. The objective is a framework of principles-based guidance in developing and implementing effective governance practices, starting at the boardroom level and continuing throughout an organization. COSO is collaborating with the National Association of Corporate Directors (NACD) for this framework. The Corporate Governance Framework (CGF) will seek to incorporate global principles and best practices that can be used by any organization, but the primary target audience is U.S. publicly traded companies. Other governance frameworks and standards exist in various countries and economies around the world, but there is currently no authoritative corporate governance guidance in the United States.
COSO strongly believes that effective organizational governance is critical in creating the policies and procedures that underpin an organization’s business culture, operations, and ensures alignment with the interests of stakeholders. Effective governance helps create trust in the capital markets and leads to ethical business practices, sustained corporate responsibility, and financial viability.
The COSO CGF will seek to define principles and approaches that ensure good governance exists throughout an organization from the Board of Directors through Senior Executives to middle-management, and all employees. The framework will complement and align with the existing COSO Internal Control (IC) and Enterprise Risk Management (ERM) frameworks. The CGF will be conceptually patterned consistent with the principles/points-of-focus based approach of existing COSO frameworks. COSO anticipates the CGF will be used by:
- Public companies to self-assess and enhance governance practices, and by start-up businesses desiring to build up their governance practices and processes.
- Private organizations seeking best practices or as part of readiness activities related to initial public offering efforts.
- External auditors, internal auditors, rating agencies, investors, listing agencies, and/or regulators will find such a framework useful in assessing governance practices at related entities.
Governance is about much, much more than accurate public financial reporting. The goal of the CGF project is to create a digestible set of governance principles that guide organizations to effective and efficient decision-making and governance practices, leading to stakeholder confidence in organizational integrity, transparency, ethical behavior, product quality, as well as in accurate and timely reporting of all types. The principles should be grounded in the common interest of boards, management, employees, shareholders, and other stakeholders in the corporate objective of long-term value creation (through ethical and legal means), the accountability of management to the board, the accountability of the board to shareholders, and ultimately, the accountability of the corporation to the broader community and society in which it operates.
The CGF is being guided by the COSO Board, NACD, and an Advisory Council consisting of representatives from COSO’s sponsoring organizations, NACD, and experts in governance. After an extensive selection process, PwC was selected to lead and manage the development of the CGF.
IMA is represented on the Corporate Governance Framework Project by:
- Larry R White, CMA, CSCA, CFM, Former IMA Global Chair, IMA’s COSO Board Member
- Michael Phillips, CMA, CFM, CTP, CRP, CICA, Director of Operations, PrimeSouth Bank, IMA’s COSO CGF Advisory Council Member
- Supporting and advising Mike Phillips on IMA’s Internal Advisory Team:
- Steve McNally, CMA, CPA, Former IMA Global Chair, Chief Financial Officer, PTI
- Gerald Ratigan, CMA, CSCA, CPIM, IMA Global Board of Directors
The CGF is currently being drafted by PwC and reviewed by the Advisory Council. It is anticipated the CGF will be released in the summer of 2025 for a 90-day public comment period. IMA members and their organizations are strongly encouraged to provide their input during the public comment period.