The Information Technology and Innovation Holding of Bank Saderat, organized a conference entitled ‘Corporate Governance’ with the presence of CEOs and board members of Saderat Holding and its subsidiary companies. 

During the conference, concepts such as meaning, framework, and elements of corporate governance were discussed, and guidelines for corporate governance in the stock market and central bank were explained.

According to IDEA News, the conference was held on Thursday, 18th of August, 2023. Ali Hakim-Javadi (CEO of Saderat Technology and Innovation Holding), Hassan Kasiri (lecturer, author, and corporate governance auditor), and Reza Sabri (member of the American Institute of Certified Public Accountants) provided explanations regarding corporate governance.

In his speech, Ali Hakim-Javadi, the CEO of Saderat Technology and Innovation Holding, emphasized the importance and implementation of corporate governance within organizations. He stated that corporate governance is important for enabling managers to guide companies while adhering to laws and regulations.

Hakim-Javadi mentioned that corporate governance is important because managers need to navigate companies while complying with laws and regulations. He mentioned that corporate governance laws around the world have undergone significant changes and transformations. He also noted that companies that have reached a certain level of maturity have naturally embraced these changes.

Referring to the fact that Saderat Holding is only two years old, Hakim-Javadi said that comparing it to companies that have been active in this field for several years and have established themselves well wouldn’t be fair. However, he expressed optimism that Saderat Holding will establish itself strongly in the corporate governance domain in the next four or five years.

Hakim-Javadi pointed out four principles that should be observed in corporate governance, with one of the tasks of the board of directors being the transparency of financial statements.

Hassan Kassiri, the lecturer, author, and corporate governance auditor, further elaborated on corporate governance guidelines in his speech.

What is Corporate Governance?

Kassiri, referring to the literal meaning of corporate governance, stated: The discussion of corporate governance is a mechanism of a system and is composed of elements. It’s a set of relationships between management, shareholders, and other stakeholders that lead to achieving company goals while overseeing the company’s performance. This is the most valid definition of corporate governance.

According to this lecturer, corporate governance consists of the two words ‘Corporate’ and ‘Governance.’ Governance means guidance or governance, and Corporate means participation and company. When these two words come together, it signifies a company that governs and guides. This topic has a long history globally.

He continued: The most important goal of a company is to create value for stakeholders, perceived as profits or service provision. To achieve this goal, a mechanism should be established to navigate through challenges and achieve efficiency.

Kassiri stated: In corporate governance, we have four principles that must be accepted as the rules of the game: transparency, accountability, respect for the rights of stakeholders or fairness and justice, and responsibility. These four principles are built upon three legal foundations: rights and obligations, responsibilities and authority, and elevation and trust.

Referring to the concept of trust, Kassiri continued: Trust should not be broken because repairing it is difficult once broken. Trust needs to be established among stakeholders.

Kassiri elaborated on the objective of forming corporate governance: Studies show that corporate governance was formed with the goal of distributing power.

He mentioned that policy-making should be separated from implementation, and corporate governance is built upon two theories: the agency or management theory and the stakeholder theory.

Importance of Auditors in Companies

Corporate governance has five principles, which are equal treatment of shareholders, disclosure and transparency, differentiation of managers’ and officials’ responsibilities, oversight, risk, and compliance.

Kassiri emphasized the importance of consultants and auditors: Companies must have internal auditors. An internal auditor is neither intrusive nor costly. Internal auditing helps managers, and an auditor can be a trusted person within the company for the manager.

He continued with the explanation of the pillars of corporate governance: The first wing is direction and evaluation, and the second wing is supervision of activities. The wing of supervision has a heart, which is the supervision of the internal control system. The internal control system is formulated once, and it is the managers’ responsibility to ensure its proper functioning. The internal control has four committees: auditing, risk, compliance, and appointments.

Kassiri continued: The risk of fraud and corruption is increasing worldwide. To combat fraud, an ethical culture should be established within the organization, and individuals should be educated on how to address fraud.

He also said: We have prepared a checklist for managers, which helps them control the internal corporate governance situation with the help of their internal auditor.

Review of the Coso Framework

Referring to the Coso framework, Kassiri said: The Coso framework is a process by which management and other employees work towards three objectives: efficiency and effectiveness, reliability of reporting, and compliance with laws. This framework has three objectives, five components, 17 principles, and 87 criteria, and it is implemented worldwide.

Kassiri explained the concept of internal control: Internal control is a means to achieve goals. Internal control is not a goal; it is a means to achieve goals.

He continued to discuss the concept of the control environment: The control environment is a set of standards, processes, and procedures that provide the basis for performing internal controls throughout the organization. Describing employees’ duties in writing is essential in this context.

Kassiri explained the concept of risk and its evaluation: Every organization faces internal and external risks. Risk is a process that indicates the likelihood of an event occurring in not achieving the organization’s objectives. Risk assessment includes a dynamic and continuous process of analysis, assessment, and reduction of risks to achieve objectives. To assess risks, the organization’s objectives must be defined.

Ethics and Reforms; The Most Important Principle of Coso
This university lecturer, referring to control activities, stated: Control activities are practices that, through the establishment of policies and procedures, help management ensure risk reduction in achieving objectives. Therefore, control activities must be implemented at all levels, and control takes two forms: preventive, manual, or automated.

Kassiri continued: An information system is highly important as information plays a significant role in units’ execution of control responsibilities in achieving goals. Continuous assessment and separate or combined evaluations provide assurance that each of the five components of internal control has effective control boxes that work based on the principles related to each component.

He concluded: There are 17 control principles in Coso, starting with ethics and ending with reforms. There might be shortcomings in the mechanism, but it is essential to identify and correct these shortcomings in a timely manner.

Hassan Kassiri reminded in the end that internal corporate governance is highly significant for the company’s health, and the risk of fraud should be taken seriously, as the grounds for corruption are readily available.

He concluded by mentioning the internal control guidelines of the stock exchange: The internal control guidelines of the stock exchange are designed and implemented based on Coso.

The Necessity of Clearly Defining Organizational Goals in Corporate Governance

Continuing on, Reza Sabri, a member of the American Institute of Certified Public Accountants (AICPA), conducted a workshop on auditing in organizations and stated: Every organization has its objectives. Determining these objectives is the responsibility of the board of directors and senior management. Corporate governance must identify the organization’s goals and strategies. The primary duty of the board of directors is supervision.

Sabri, referring to how this supervision should be carried out, stated: Governance must be separated from management. The CEO cannot be a member of the board of directors. In addition to implementing the Central Bank’s regulations, the IT holding of Bank Saderat should also implement the Stock Exchange’s regulations.

Regarding the structure of corporate governance, the Three Lines of Defense model, and GRC, Sabri provided explanations and detailed the responsibilities of internal auditors.

He said: Internal auditors have a process-oriented approach to issues. Internal auditors act as consultants and provide assurance.

Sabri continued: Even if we set aside the issue of fraud, banks are moving towards digital banking, but inspections are still being conducted in a traditional manner. This method needs to be changed.