'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)

? ? ? ? ?Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)?

? ? ? ? ? ? ? (i) ?the role of corporate controller: Last Wednesday, EY released this report on corporate controllers, "How can the financial controller transform to shape the future with confidence? ", based on research it conducted this May and June, including an online survey as well as a number of select in-depth interviews with some 1000 controllers and some CFOs at companies with US$1billion or more in annual revenue. The report is discussed in last Wednesday's Fortune CFO Daily Newsletter, "Financial controllers are the CFO’s right hand—and 86% say their role will change dramatically ":

? ? ? ? ? ? ? ? ? ?"....(C)ontrollers, the right-hand person to a CFO, are foreseeing radical changes in their roles.?A new global report by EY released this morning, finds 86% of financial controllers expect their roles to change dramatically in the next five years. Controllers oversee a company’s day-to-day accounting operations, implement financial plans, and supervise accountants. They ensure the finance organization meets compliance standards with clean financial records. But that’s now becoming just table stakes.

? ? ? ? ? ? ? ? ? ?"More than a third (39%) expect the focus to shift to value creation—actively supporting business growth. That’s a departure from the traditional strongholds of value protection and optimization, according to EY.....“Controllers are enabling CFOs to take on the additional scope they need to be successful,” Myles Corson, EY?Global and Americas strategy and markets leader for financial accounting advisory services, told me.?Traditionally, a controller’s agenda was primarily about getting numbers right, driving efficiency, and being cost-effective, Corson said. But they’re expected more than ever to be a part of the value-creation journey for the company, which requires also being forward-looking. “How do you measure and deliver the return, rather than just measuring the investment in the input?” he explained......

? ? ? ? ? ? ? ? ? "Not every controller aspires to become a CFO: There’s a cohort EY describes as “confident controllers,” 25% of the overall survey sample, who are in many cases, more tenured and experienced. These controllers like their position and want to stay in the role. Only a third of confident controllers said they want to become chief financial officer.?Confident controllers are different from those controllers who see the job as a stepping stone to the CFO seat, Corson said. Controllers seeking a CFO path are mainly interested in delivering a really high-quality performance in the current role, rather than getting into the weeds of innovating it, he explained.

? ? ? ? ? ? ? ? ? "Seventy-three percent of controllers who want to stay in their positions say innovation matters, compared to just 51% of those who aspire to be CFOs. Confident controllers can show how the role can be a force for true value creation, according to Corson.....I asked Corson if innovative controllers who understand value creation will be in demand.?“Absolutely; I think that makes it even more important that the controller has traditional skills, but is also able to step up and interact with that new CFO mandate,” he said."

? ? ? ? ? ? ? (ii) updated DOJ guidance for chief compliance officers (in particular, on AI risks): In 2000, the U.S. Department of Justice (DOJ) issued guidance for creating an effective?compliance program, "Evaluation of Corporate Compliance Programs" (ECCP), particularly?useful to chief compliance officers and lawyers.?The ECCP has been updated periodically since then, and was recently updated again, inter alia with respect to AI risks,?as announced on Sept.23 in these remarks ?by the Principal Deputy Assistant Attorney General Nicole Argentieri at the Society of Corporate Compliance and Ethics 23rd Annual Compliance & Ethics Institute. This is the updated version of the DOJ's "Evaluation of Corporate Compliance Programs " (September/24), and it is discussed in this WSJ article last Tuesday, "Justice Department Pushes Companies to Consider AI Risks ":

? ? ? ? ? ? ? ? ? ?"Compliance officers should now add artificial intelligence to the list of things they need to worry about, the Justice Department says.?The department this week announced changes to guidance prosecutors use to assess a company’s compliance program when it comes under investigation for bribery, fraud or other criminal offenses. The guidance, known as the DOJ’s Evaluation of Corporate Compliance Programs, is an important document for lawyers and compliance officers.?Officials say companies with good compliance programs—along the lines described in the guidelines—are eligible for more lenient treatment even if a compliance breakdown occurs.?

? ? ? ? ? ? ? ? ?"Besides AI, the guidance revisions address how companies should handle whistleblowers, and how they should incorporate data and lessons learned from prior misconduct, within their business and at others. Nicole Argentieri, the head of the Justice Department’s criminal division, announced the changes Monday at a compliance conference in Texas. The changes expand upon the idea that companies should constantly assess risks, learn from compliance slip-ups and adapt their compliance programs as needed......

? ? ? ? ? ? ? ? ? "The new guidance asks compliance officers to walk a fine line between taking advantage of AI’s potential benefits and being aware of the risks it poses to their company’s business and its compliance program. Prosecutors should ask companies about how they assess?the potential effect of new technologies such as AI on their ability to comply with criminal laws, and about their approach to governance regarding the use of new technologies such as AI in their commercial business and compliance program. The guidance also makes changes to an area of focus closely related to the use of AI: how companies use internal data to strengthen their compliance programs......"

? ? ? ? ? ? ? ? ? ?Below are excerpts from the remarks referred to above?by Principal Deputy Assistant Attorney General Nicole Argentieri:

? ? ? ? ? ? ? ? ? "......I’d like to begin with our Evaluation of Corporate Compliance Programs, or ECCP. I’m sure many of you are familiar with it —?it is an invaluable resource for companies.?And it is the roadmap Criminal Division prosecutors use to evaluate a company’s compliance program, including the questions prosecutors will ask as they assess a compliance program in determining how to resolve a criminal investigation.....Just as we expect corporations to continuously review and update their compliance programs to account for emerging risk factors, we regularly evaluate our policies and enforcement tools, including the ECCP, to account for changing circumstances and new risks.?I’m pleased to announce today that we have updated our ECCP to address some of these emerging risks....

? ? ? ? ? ? ? ? ?"First, in March, Deputy Attorney General Lisa Monaco announced that prosecutors will consider how companies mitigate the risk of misusing artificial intelligence?and directed the Criminal Division to include an assessment of disruptive technology risks — including AI — in the ECCP. Today, I’m unveiling the results. Our updated ECCP includes an evaluation of how companies are assessing and managing risk related to the use of new technology such as artificial intelligence both in their business and in their compliance programs.

? ? ? ? ? ? ? ? ? "Under the ECCP, prosecutors will consider the technology that a company and its employees use to conduct business, whether the company has conducted a risk assessment of the use of that technology, and whether the company has taken appropriate steps to mitigate any risk associated with the use of that technology. For example, prosecutors will consider whether the company is vulnerable to criminal schemes enabled by new technology, such as false approvals and documentation generated by AI. If so, we will consider whether compliance controls and tools are in place to identify and mitigate those risks, such as tools to confirm the accuracy or reliability of data used by the business. We also want to know whether the company is monitoring and testing its technology to evaluate if it is functioning as intended and consistent with the company’s code of conduct....."

? ? ? ? ? ? ? (iii) board composition: the?case for more company insiders to serve on the board: Below is the headnote summary of this HBR post last Monday, "The Case for More Company Insiders on Boards ", by Bryce Tingle, the N. Murray Edwards Chair in Business Law in the Faculty of Law at the University of Calgary. and a member of one of the securities commissions in Canada:

? ? ? ? ? ? ? ? ? ? "Summary: Until the 1970s, corporate boards were dominated by inside directors — people employed by or affiliated with the company in some way. As of 2023, Spencer Stuart research found that 85% of directors are independent. The switch came in response to a number of trends, including the distrust of American institutions after Watergate and Vietnam, and SEC rule changes that increased the importance of independent directors. However, with few exceptions, empirical studies have found no connection between board independence and company performance outcomes. Business leaders should reconsider the merits of inside directors, who 1)?bring a deeper understanding of the company, its strategy, R&D opportunities, and market competitors; 2)?have a deeper stake in the company’s long-term success, as their professional reputations and continued employment depend on it; 3)?are less likely to look to the company’s current share price as a guide to how the company is doing; and 4)?create a balance of power on the board, as opposed to only giving the CEO confidential and unfettered access."

? ? ? ? ? ? ? (iv) press release of the day: NYSE/TSX listed Teck Resources Limited?announced last Friday in this press release ?the appointment of the current Group General Counsel?at BHP to?take on the combined roles of Chief Legal and Chief Sustainability Officers,?as follows:

? ? ? ? ? ? ? ? ? ?"Teck Resources Limited?today announced the?appointment of Lyndon Arnall as Executive Vice President and Chief Legal and Sustainability Officer,?effective November 1, 2024. Mr. Arnall will succeed Charlene Ripley, who has confirmed her intention to retire at the end of this year......

? ? ? ? ? ? ? ? ? ? "Mr. Arnall joins Teck from BHP,?where he served for 12 years, most recently as Group General Counsel. As EVP and Chief Legal and Sustainability Officer, Mr. Arnall will be responsible for maintaining Teck’s leading sustainability performance, and supporting the business through legal, risk and compliance functions......"

? ? ? ? ? ? ? -----------------------------------------------------

Please contact me if you would like to be on the distribution list and receive every issue of this newsletter directly in your inbox.