COSO prioritizes corporate governance framework

The Committee of Sponsoring Organizations of the Treadway Commission, also known as COSO, is working with the National Association of Corporate Directors on developing a corporate governance framework.

COSO has already developed widely used frameworks for internal controls and enterprise risk management. Last month, COSO and the NACD issued a request for proposals to develop the corporate governance framework. The deadline to receive written questions was March 1, and COSO has set a deadline of March 8 to respond to those questions. Proposals are due April 1. 

Lucia Wind took over as executive director and chair of COSO last January after working as vice president of internal audit at the technology company Unisys. “This was a project that had been talked about for quite some time before I joined the board,” she told Accounting Today. “Corporate governance is evolving and it’s becoming much more relevant and much more important worldwide.”

COSO decided to team up with the NACD because of its experience in the boardroom and relationships with corporate directors. “They are the authority on best practices and training board members, a great partner to bring to the brand and for our frameworks that are widely accepted globally,” said Wind. “We thought that the partnership between the two would be very helpful. What we wanted to accomplish was to partner with NACD, but bring in a slightly different lens as well, to expand the framework beyond the boardroom to the management layer as well.”

Auditors and accountants may be able to benefit from the upcoming framework, but it’s aimed more at executives and corporate directors. “Most importantly we want organizations and companies to use it, the members of their boards and committees as well as management,” said Wind. “The focus would be not just for publicly traded companies. It’s for private companies that are thinking about going public. They’re looking into what they should have in place and what are the best practices. What are the things we should talk about based on their maturity and their appetite around governance, some guardrails on which to focus, as well as small organizations and not-for-profits that really just want to invest in some better governance practices.”

However, she sees ways the framework could be useful alongside the internal control and ERM frameworks. The corporate governance framework probably won’t deal with the topic of board diversity, but Wind noted that COSO has already provided guidance on applying its internal control integrated framework to sustainability reporting.

So far, COSO has heard from a number of groups that are interested in developing the guidance. “We have quite a few organizations that are interested in working with us on this that have responded,” she said. “I don’t know that we necessarily have a specific organization in mind. We want to consider anybody and everybody that has responded and see, based on their responses and thought leadership and how they would approach the project, which will be the best fit.” COSO will also be working closely with the NACD on the framework, as well as COSO’s sponsoring organizations. 

COSO is jointly sponsored by the American Accounting Association, the American Institute of CPAs, Financial Executives International, the Institute of Management Accountants, and the Institute of Internal Auditors. Wind meets regularly with representatives from them, sometimes on a weekly or daily basis. 

“Some of the organizations are much more global so we can dip into those resources that we need and the audiences that we want to reach,” she said. “Some of the organizations help with translating material into different languages. She also continues to consult with her predecessor Paul Sobel.

The major priority for now will be developing the corporate governance framework with the NACD, but Wind has been working on other projects as well. “I’m hoping that this will be part of my legacy, what we do for COSO and our audiences, members and constituents out there,” said Wind. “That will be the biggest project, but there are other efforts that I would like to tackle in the background.” 

Over the past year, she has worked on refreshing COSO’s website, logo and branding with a new color scheme, the first in over a decade for the nearly 40-year-old organization. COSO also rolled out its guidance on using the internal control framework for sustainability reporting, as well as a fraud risk management guide developed with the Association of Certified Fraud Examiners.

She has also developed a LinkedIn group for COSO where it can interact with members and anyone else interested in joining. 

“This is their way of interacting with COSO and having that two-way conversation,” said Wind. “My intent is to post a lot of polls and understand what our communities worldwide need, so when we think about developing guidance, we’re developing it with the end user in mind.”