Of Cats and Cows: Global Trends in Regulating Accountability Marilyn Wyatt

Two major trends illustrate the challenges of defining a sector- wide approach to accountability. The Cows: Global corporate governance reforms The Cows: Global corporate governance reforms The Cats: The legislation-versus self- regulation debate in the US foundation sector The Cats: The legislation-versus self- regulation debate in the US foundation sector

Recent corporate scandals reveal the hazards of lazy and incompetent boards.  Excessive CEO domination  Dubious or fraudulent accounting practices  Decreased shareholder influence  Erosion of organizational values  Loss of investor confidence  Ultimately—BANKRUPTCY

The result? Aggressive new regulations / codes aimed at improving corporate governance. 2002: Sarbanes Oxley in US 2002: Sarbanes Oxley in US 2003: EC Transparency Obligations 2003: EC Transparency Obligations 2004: Revised OECD Corporate Governance Principles 2004: Revised OECD Corporate Governance Principles New or revised corporate governance codes in more than 50 countries New or revised corporate governance codes in more than 50 countries

Worldwide, corporate governance codes emphasize these key themes: Greater board independence Greater board independence Use of international accounting standards Use of international accounting standards Frequent / transparent financial reporting Frequent / transparent financial reporting Increased minority shareholder powers Increased minority shareholder powers The importance of organizational values The importance of organizational values “Comply or explain” “Comply or explain”

Corporate scandals have dramatically affected the US nonprofit sector. Cases of board negligence and abuse have been easy to find. Cases of board negligence and abuse have been easy to find. Congress has threatened tighter controls. Congress has threatened tighter controls. Fundamental “value added” of foundations is being question. Fundamental “value added” of foundations is being question. There is an urgent need for a coordinated response. There is an urgent need for a coordinated response.

The sector is in turmoil, but there’s been little agreement on how to respond. New legislation? New legislation? Better enforcement of existing laws? Better enforcement of existing laws? Stricter voluntary codes? Stricter voluntary codes? Accreditation? Accreditation? Education and training of board members? Education and training of board members?

Today there is increasing talk of a new regulatory body for charities. But what would it look like? But what would it look like? Should it be public or private, or both? Should it be public or private, or both? Should it have the authority to issue certification and impose sanctions? Should it have the authority to issue certification and impose sanctions? Should it operate on a state or a federal level? Should it operate on a state or a federal level? How far should homogenization of standards go? How far should homogenization of standards go?