Board and audit committee director development programs

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1 Board and audit committee director development programs

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3 Deloitte is pleased to provide a tailored, well recognized, industry leading director development education program for boards of directors and audit committee members. We offer a curriculum that includes topics of significant relevance and we can assist in the development of a board education program. This curriculum brings together the breadth of Deloitte subject-matter resources in governance, industry, and business to address the demands of boards and audit committees in the current environment. Boards are seeking education to better understand their role and responsibilities and to assess whether the topics they are focused on are the right ones and are being discussed at the right level. Our curriculum for director development is focused on what your board wants and should know. In addition, our audit committee education is an extension of our board development programs, and many of the topics for the board are relevant to and can be tailored for a separate audit committee session. As a leading practice, audit committees should maintain an education program to keep their members informed of the latest technical accounting, governance, and broader business issues. Our audit committee education (ACE) curriculum is developed in collaboration with the audit committee chairman or management, your Deloitte engagement team, and the Deloitte Center for Board Effectiveness to tailor the content appropriately. We recognize that audit committees often incorporate education sessions in their meeting calendars and encourage you to consider adding a session at the beginning or end of certain meetings or setting aside time for a dedicated and tailored education program. 3

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5 The Deloitte Governance Framework Corporate governance continues to evolve with new topics; more scrutiny of the role of the board and board committees; and a continued path for enhanced board, management, and investor relations. Many boards still struggle with fundamental questions, such as understanding the role of the board in the company s corporate governance program and what the board s role is with regard to specific oversight areas. Figure 1: Deloitte Governance Framework Board governance Governance Strategy Talent The Deloitte Governance Framework (see Figure 1) offers an end-to-end view of corporate governance and forms the basis for the tools that help boards and executives quickly identify potential opportunities to improve effectiveness and efficiency while helping to define the role of the board and management. Performance Planning Culture Risk Culture Culture Integrity Compliance Underlying all the elements of the framework is the corporate governance infrastructure, which is the aggregation of governance operating models people, processes, and technologies that executive management has put in place to govern the day-today activities of the company, as well as the processes used to accumulate information and report it to the board and external stakeholders. This is represented by the blue band that encircles the entire framework. The board s role in the corporate governance infrastructure can vary from that of an overseer to an active participant in the processes themselves. The board s responsibility for oversight of the various elements is depicted in the framework as a flexible overlay, with the level of the board s participation in the operating model decreasing as you move from top to bottom. In keeping with Deloitte s Risk Intelligent Enterprise concepts, risk and culture are at the core of the framework, influencing the effectiveness of all elements of corporate governance. Operations Reporting Corporate governance infrastructure The top half of the Deloitte Governance Framework highlights governance areas where the responsibility of the board is heightened. The following sessions can be incorporated into your director development program; each topic is tied to an element of board oversight responsibility and can be tailored for your board. The Governance Framework provides context for the role of the board and the type of education the Deloitte Center for Board Effectiveness offers. 5

6 Director development program table of contents Director development programs can be structured in a number of ways and may be organized over the course of a year, either as part of or in addition to regularly scheduled board and/or audit committee meetings or as a separate half or full day education program. Sessions are fully personalized to the specific facts and circumstances of the company. Your Deloitte engagement team develops each tailored session in collaboration with the company s management and the Deloitte Center for Board Effectiveness. Deloitte faculty with subject-matter and/or industry experience will facilitate the education sessions. Finally, if desired, programs can leverage Web or video conferencing. 6

7 We offer the following programs. A description of each follows. Director development program topics The role of the board: beyond the fiduciary duties Monitoring performance: practical and effective methods Setting the strategic agenda Board governance: effective practices and going beyond Talent management: what is the role of the board? Integrity in the boardroom and beyond Crisis management/adaptation Board composition Executive compensation Reporting oversight/delegation of authority Board Audit committee Risk oversight Cultivating the risk-intelligent culture Ethics and compliance Enterprise compliance Regulatory update Economic outlook Capital structure Leveraging information technology Cybersecurity Sustainability Analytics and big data Mergers and acquisitions/ipo readiness Tax landscape Anti-money laundering The Foreign Corrupt Practices Act and other global anticorruption laws Antifraud programs and controls Audit committee leading practices Audit committee onboarding Finance talent assessment Interaction with the internal auditors The ebb and flow of technical accounting activity Assessing earnings quality and financial statements analysis Audit committee oversight of internal control and responding to risk of management override Corporate investigations 7

8 8 The role of the board: beyond the fiduciary duties Understanding and fulfilling the board s role in accordance with its fiduciary duties is expected, but to measure overall effectiveness, boards may need clarity with regard to this role. A corporate governance framework can help define the roles of the board and management, delineate duties, help prevent duplication of efforts, and confirm that critical issues are being discussed. In this session, we will discuss the role of the board with respect to five critical governance elements the board is responsible for and cannot delegate to management. We will provide practical steps for measuring how effective the board is using specific attributes to identify strengths and weaknesses in each governance element. Monitoring performance: practical and effective methods Monitoring performance is a critical function of boards. An effective board monitors the overall performance of the organization, including its operational, strategic, and financial objectives. This session will provide practical advice and tools for reviewing and using data and analyses received from management. It will provide insight into how the relevant metrics can be selected and used to identify critical issues. In addition, the session will provide guidelines for assessing how effective the board is at identifying and monitoring potential areas for improvement. Setting the strategic agenda One of the primary roles of the board is to understand and advise on the company s strategic plans and direction. This session will focus on practices and approaches for the board to add the most value in the strategy-setting process and what it means to continually monitor strategic objectives. The discussion will address new thinking with regard to analytics and risk sensing as a way to think about an organization s strategy. It will highlight questions for directors to ask, what drives value for the organization, and the tools to identify and pursue the initiatives. Board governance: effective practices and going beyond The board is responsible for establishing the structures and processes needed to fulfill its mission and responsibilities with respect to investors, regulators, and other stakeholders. This session will provide a tailored look into leading practices with regard to governance policies, structures, composition, and dynamics to enhance the board s effectiveness. Talent management: what is the role of the board? As companies face greater business challenges in response to increased globalization, intense competition, and financial regulation, the skills required of executives continue to evolve. Boards hold an important position in maintaining the talent strategies needed to execute the overall business objectives and to manage the talent-related risk inherent in the commercial world today. The board exercises critical oversight of management s talent strategies to support capital investment, leadership and succession planning, reputational risk and talent retention and development. This session will focus on ways the organization can meet the future challenges, develop a talent and leadership strategy, identify critical workforce segments, and establish programs to develop leaders.

9 Integrity in the boardroom and beyond Integrity is critical to an organization s culture and a requirement for an effective dynamic in the boardroom. The board also helps set the tone for the culture of an organization. This session will discuss how the board works with management to develop a high-integrity culture. It will offer practical insights and a roadmap to more effective oversight of integrity and culture. Crisis management/adaptation Organizations face an array of scenarios that can lead to devastating business interruption, if not a significant change in priorities. These may include natural disasters, technological disruption, terror or cyber threats, workplace confrontations, financial crime, and financial distress. A robust crisis management strategy and response plan is recommended, and the plan should be tested and updated regularly. Research indicates that every $1 spent on crisis preparedness results in $15 savings in future losses. Not only should organizations plan for the unexpected, but doing so can turn this into an unforeseen advantage over their competitors. This session will help the board understand its role and highlight tools to assist with preparation efforts. Board composition Ongoing regulatory changes, pressure from shareholders and investors, and business model threats are pressuring companies to develop a diverse board that can provide the desired mix of skills and knowledge to best govern the organization. Furthermore, balanced board composition is seen by shareholders as an instrument to maximize performance. In this session, we will discuss recent trends in board composition, including board independence, diversity (e.g., company and industry experience, functional background, ethnicity and gender) of board members, and CEO duality (i.e., where the CEO is also the chair of the board). We will also outline the valuable role of the nomination committee in seeking board members with the skills and experience needed by your company and how to comply with independence and diversity regulations. Executive compensation This session will discuss recent trends in executive compensation, including the shift to performancebased pay; the reduction in severance multiples; and the adoption of pledging, hedging, and claw-back policies. We will also explore strategies for aligning pay and performance and the use of realizable pay in evaluating performance alignment. Sample pay-forperformance techniques and proxy disclosures will be reviewed, as will the proxy advisory firms sayon-pay voting guidelines and effective shareholder engagement strategies. A regulatory update will cover new Securities and Exchange Commission (SEC) disclosure rules, including the pay ratio test. Reporting oversight/delegation of authority A clear, comprehensive organizational structure normally defines reporting lines for decision making, risk management, financial and regulatory reporting, public disclosures, and crisis preparedness and response. This session will help directors identify practices and tools to establish effective monitoring activities through the company s diverse reporting processes. 9

10 Risk oversight The foundation to effective governance is effective risk oversight and management. There is increasing focus on how the board oversees risk. This includes understanding and influencing management s process for identifying, assessing, and monitoring risks; determining which risks the full board should discuss regularly; and establishing how the board aligns risk with the strategic objectives of the business. In the board session, we will explore leading practices for effective oversight of risk programs and benchmarking trends with respect to how companies and specific industries oversee risk. Ethics and compliance Aside from the need to comply with regulatory requirements related to the oversight of ethics and compliance programs, many governance experts agree that one of the board s goals should be to help set the appropriate tone at the top for the organization. The board session will focus on the critical components of an ethical culture, many of the significant compliance issues, and the regulatory requirements facing U.S. companies. We will discuss leading practices for establishing an effective compliance program and how the audit committee can oversee and support that program. 10 As a result of the NYSE listing standards, audit committees are required to discuss the company s risk assessment and risk management policies with management. Further, they are responsible for the oversight of financial risk, specifically the identification and continued assessment of such risks. Some audit committees have become the primary body for risk oversight. In the audit committee session, we will explore leading practices and latest trends in this area. Cultivating the risk-intelligent culture A risk-intelligent enterprise is one where leaders understand that every action that can create value also carries the potential for risk. Leaders recognize that discussions of risk and value cannot be separated, and they view risk as a decision driver rather than a consequence of decisions that were already made. This session will discuss practices and experiences that companies can implement to cultivate a risk-intelligent culture. The audit committee session will outline the critical components of an ethical culture and the areas of focus for audit committees with regard to ethical and compliance activities. We will touch on topics such as the whistleblower hotline, antifraud programs, codes of ethics, and setting the tone from the top. Enterprise compliance Enterprise compliance spans multiple businesses, organizational units, and geographies. Given the pace and scale of change senior executives and boards are facing, they are more concerned than ever that the reactive way of managing compliance may cause them to fall behind the competition or leave them exposed to greater regulatory or reputational risk. Enterprise compliance is a coordinated approach spanning multiple businesses, organizational units, and geographies, enabled by people, processes, and technology. It is an integrated model that helps to ensure ethics and compliance at every level. During this session, we will discuss the board or audit committee s role in creating a compliance culture with respect to the company s overall compliance program environment, execution, and evaluation and the tough questions members should consider addressing on these issues.

11 Regulatory update This session will provide an update on current and emerging regulatory matters including the SEC and Public Company Accounting Oversight Board s agenda. While the session will provide a broader overview of the regulatory landscape, we will specifically focus on financial reporting and disclosure matters of particular relevance to independent auditors and public companies. Economic outlook Deloitte Research provides thought leadership and commentary on consumer confidence, inflation, the business cycle, industry, and a wealth of other economic issues. This session will discuss the latest editions of the quarterly Global Economic Outlook and the effects that recent economic, demographic, political, and technological changes can have on your company s business strategy. Capital structure As companies and their boards navigate economic cycles, they often face critical decisions regarding how to thrive. In evaluating strategic alternatives related to business and organizational structure, product mix, or geographic footprint, management and the board may consider a range of financing and transaction alternatives to support the company s growth or survival strategies. This session will provide an overview of these alternatives and the impacts and risks to consider. Leveraging information technology A host of information technology (IT) tools are available to help increase the effectiveness of boards and audit committees. These tools can help foster communication and make it easier to share pertinent documents and materials. Furthermore, IT can allow committee members to gain insight into the organization s risk management process by providing reports or analytics that can form a basis for future discussions. This session will discuss taking a riskintelligent approach to IT oversight. Cybersecurity Not long ago, the term cybersecurity was not frequently heard or addressed in the boardroom. Cybersecurity was often referred to as an IT risk, and the management and oversight of it was the responsibility of the chief information or technology officer, not the board. With the rapid advancement of technology, cybersecurity has become an increasingly challenging risk that boards may need to address. In this session, we will explore the board s role in the cyber world. Sustainability In light of increasing shareholder activism, changing consumer behavior, and SEC-required disclosures, more directors are considering environmental, social, and governance concerns as part of their oversight responsibilities. In the board session, we will discuss what directors should be considering now and what to anticipate in the future as they seek to respond to sustainability issues and potential market opportunities. We will review the various risks and exposures facing companies from environmental, social, and governance perspectives and consider how directors can get in front of these risks. 11

12 Audit committees play an especially important role in sustainability reporting as they are normally responsible for companies sound reporting practices and commissioning assurance for various reports, including those covering environmental and social topics. In the audit committee session, we will discuss what audit committee members should be considering now and what to anticipate in the future as they seek to respond to sustainability issues and potential market opportunities. We will review various reporting frameworks, highlighting their pros and cons, and discuss the audit trends for sustainability data in the United States. Analytics and big data Analytics and big data are hot topics in the audit committee, boardroom and the c-suite, with many executives and directors seeking to better understand the facts and separate them from the hype. This session is designed to stimulate thinking and guide discussion on how the organization can build and execute analytics in an end-to-end fashion and realize significant value and return on investment. In addition to guidance on how to manage and sustain analytics from the audit committee to the boardroom to the front lines, we will provide pragmatic and actionable insights that can help set the direction for strategic analytic activities that address vexing business problems. Mergers and acquisitions/ipo readiness Exploring the opportunity to go public presents many challenges due to market volatility, increased regulations, expanded investor scrutiny of corporate governance, and heightened legislative influence. The Dodd-Frank Wall Street Reform and Consumer Protection Act 1 and the Jump Start Our Business Startups (JOBS) Act 2 are examples of recent legislation contributing to new regulations affecting public companies. This session will help you understand the requirements of an offering in light of the changing IPO landscape; including the people you may need to assist you, their roles, regulations with which you must comply, and what effect a public offering may have on your company. Tax landscape Forward-thinking audit committees have taken steps to gain an understanding of tax risks. Risk-intelligent boards consider tax to be a common thread running through many business risks. This perspective focuses on both possible downside tax implications and the potential value gained through appropriate tax planning. In addition to discussing tax-related financial reporting risks and tax s growing relevancy to risk management programs, this session will provide insight into tax legislative initiatives that could significantly affect corporate taxpayers. 1 Dodd Frank and Wall Street Reform Act, H.R. 4173, January 5, Jump Start Our Business Startups Act, H.R. 3606, January 3,

13 Anti-money laundering Negative publicity, damage to corporate reputation, loss of goodwill, and legal and regulatory sanctions are all possible consequences of an organization s failure to manage the risk of money laundering. In today s regulatory environment, money laundering risks should be managed at the highest level of an organization. This session will cover how the board and audit committee can work with management to improve internal controls, how to respond to inquiries by the regulators, and how to implement or enhance their compliance programs. The Foreign Corrupt Practices Act and other global anticorruption laws The Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign government officials and requires U.S. companies to maintain accurate records and a system of internal controls designed to identify suspect payments. The U.K. Bribery Act also criminalizes commercial bribery globally by companies that do business in the United Kingdom, while new anticorruption laws in China, Brazil, and other countries increase enforcement risks. Since 2001, a surge in FCPA enforcement actions by the Department of Justice and the SEC has resulted in criminal convictions of companies and individuals, substantial penalties, and reputational damage. This session will be tailored to address corruption risks in countries where your company operates and to explore leading practices for mitigating these risks. Antifraud programs and controls Drawing on real-world examples, this session will focus on the origins, characteristics, and common warning signs of financial reporting fraud, corruption, and asset misappropriation. It will explore how the board and audit committee can more effectively encourage and evaluate management s implementation of antifraud programs and controls and oversee management s processes for responding promptly to alleged or suspected wrongdoing. Audit committee leading practices This session will provide an overview of current governance developments that are of particular interest to audit committees. We will discuss leading practices and trends focused on specific audit committee areas of responsibility as well as other significant agenda items. Audit committee onboarding Expectations for good governance continue to grow with the focus on risk, integrity in financial reporting, regulatory compliance, and balancing short-term interest with long-term strategies. As a new audit committee member, the organization you serve and its shareholders rely on your judgment to appropriately oversee areas such as these. Deloitte LLP s Center for Board Effectiveness has a number of onboarding resources to assist new audit committee members in making an effective and efficient transition. 13

14 14 Finance talent assessment One of the most important aspects of the audit committee s role in overseeing financial reporting is assessing the abilities of the company s finance talent. This session will focus on how the audit committee can address the finance talent war, including ways to evaluate the development of the finance management team; how to think through the skills, abilities, and experience needed from a technical and leadership perspective; and steps the audit committee should take in working with management on this important initiative. Interaction with the internal auditors Audit committees are expected to provide oversight as to whether internal auditors are performing appropriate activities, are independent and objective, have adequate resources, and are monitoring risk and controls proactively. This session will discuss the tools available and leading practices to help you effectively interact with your internal audit team. The ebb and flow of technical accounting activity The Financial Accounting Standards Board has been working on a number of major accounting pronouncements, some of which are joint projects with the International Accounting Standards Board. These projects can have a significant effect on company s balance sheet, performance statement, and disclosures. Staying informed of the latest technical accounting standards is a vital component of audit committee education. This session will provide an overview of the current landscape of proposed rulemaking. Assessing earnings quality and financial statements analysis Audit committees should be satisfied that a company s financial reports reflect a fair and balanced picture of operating results and financial position. This requires an ability to understand financial statements and the accounting methods used to generate the results and disclosures. By outlining a framework for financial statement analysis, this session will help audit committees fulfill their oversight obligations at the appropriate level of detail. The program will also cover emerging accounting and financial reporting issues of particular importance to the company. Audit committee oversight of internal control and responding to risk of management override In May 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) updated its Internal Control Integrated Framework, which companies use to design and evaluate the effectiveness of internal control over financial reporting. Many companies also use the COSO framework to meet operational and compliance objectives. This session will focus on the changes in the new COSO framework, including enhanced concepts with respect to implementation and the role of the board of directors in creating an effective control environment. We also will discuss considerations for audit committees in mitigating the risk of management override of internal control. Corporate investigations The audit committee will often take the lead on behalf of the full board when it comes to overseeing or leading internal investigations. A properly executed investigation helps protect the company from reputational risk. This program provides an overview of leading practices employed and the role of the committee, the full board, general counsel, management, and any outside counsel or advisers.

15 Contacts Deloitte Center for Board Effectiveness Deborah DeHaas Vice Chairman, Chief Inclusion Officer and National Managing Partner Center for Board Effectiveness Deloitte Henry Phillips Vice Chairman and National Managing Partner Deloitte & Touche LLP Maureen Bujno Managing Director Center for Board Effectiveness Deloitte LLP Krista Parsons Managing Director Center for Board Effectiveness Deloitte & Touche LLP Debbie McCormack Managing Director Center for Board Effectiveness Deloitte LLP 15

16 This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, Deloitte means Deloitte LLP and its subsidiaries. Please see about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright 2017 Deloitte Development LLC. All rights reserved.