ACCA Strategic Professional · Strategic Business Leader · Governance scope and approaches
Orlin Group, a multinational, is deciding how to structure governance across subsidiaries in several countries. Some countries have principles-based codes; one has legislated rules. The group chair wants a single approach that captures the benefits of both. Which course of action best fits this aim?
The best course is to meet all mandatory legal requirements, including the legislated rules, and layer principles-based values over them so that behaviour follows the spirit of governance beyond the minimum. This combines the certainty of rules with the flexibility of principles, without breaching any national law.
- AApply the strictest legal requirements everywhere and adopt principles-based values to guide behaviour beyond the minimumCorrect
- BApply only the local code in each country and set no group-wide standard
- CAdopt the principles-based approach everywhere and ignore the legislated rules
- DReplace all local requirements with a group rulebook that overrides national law
Explanation
Legal rules must always be met, and a principles-based overlay promotes the spirit of good governance and consistent culture. Ignoring legislation or overriding national law is unlawful, and having no group standard gives inconsistent governance.
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