Ernst & Young LLP and the Society for Corporate Governance release “The delegation edge: A guide to successful delegation and authority” | EY

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Ernst & Young LLP and the Society for Corporate Governance release “The delegation edge: A guide to successful delegation and authority” | EY

New research finds that most organizations have delegation of authority policies, but their format, content, management, and governance vary.

“The delegation edge: A guide to successful delegation and authority,” a new study based on a survey of more than 200 members of the Society for Corporate Governance at public and private companies completed by Ernst & Young LLP (EY US) and the Society for Corporate Governance (the Society), finds that nearly 90% of companies represented by respondents have implemented a delegation of authority (DOA) policy to support their decision-making and risk mitigation. However, training employees on the policy and its use, enforcing policies, and updating policies represent areas of opportunity for most companies.

EY US and the Society for Corporate Governance conducted the survey in response to the dearth of information that exists on DOA policies as well as to provide important context for these policies within the overall governance framework and recommendations for development and integration.

“The importance of establishing an effective DOA policy cannot be understated, and we see companies struggling with how to frame these policies,” said Dan Helwing, EY US Partner and EY Americas Corporate Advisory Leader. “Before crafting a DOA, executives need to understand their objectives for the policy, how it can help guide their management, spending authority thresholds and, among other things, what guidance the policy should provide about who makes what decisions for their company.”

Among the many advantages, the report notes that effective delegation can enhance efficiency and employee engagement, aid in organizational accountability, improve culture, free up managerial time to address other matters, and strengthen compliance and trust.

Conversely, however, the report observes that ineffective delegation of authority can heighten the potential for miscommunication and create a lack of clarity and accountability. Delegation to inappropriate resources, integrity issues arising from excessive discretion, operational bottlenecks and inconsistent decision-making are also risks associated with an ineffective DOA that could result in costly mistakes leading to litigation, noncompliance with laws or reputational damage.

“Delegations of authority are a key aspect of the overall corporate governance framework and can be critical to internal controls and operational effectiveness. Companies are seeking relevant examples and guidance to inform their establishment of clear decision-making frameworks,” said Randi Val Morrison, Senior Vice President and General Counsel for the Society for Corporate Governance. “This research reveals common practices and areas of opportunity for improvement, together with relevant guidance.”

The following are among the research report authors’ recommendations for companies:

  • Integrate the DOA within the company’s governance framework.
  • Evaluate and update their current DOA to keep pace with the business and remain aligned with regulations governing operations.
  • Verify that key company stakeholders agree with the policy directives so that the DOA is in conformity with the business’s governance and compliance functions to support effective delegation, accounting and operational transparency.
  • Consider the best options to streamline and automate approval processes in the DOA, thereby designating clear lines of authority.
  • Maintain sufficient board oversight of delegation authority processes to be compliant with other corporate policies and governing documents.

EY US and the Society for Corporate Governance surveyed the Society’s members, including chief legal officers, general counsels, and corporate secretaries, to learn about common delegation of authority practices, including how they are structured, managed and administered; their scope; and challenges associated with construction and execution. To access the report, please visit.

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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit ey.com.

About the Society for Corporate Governance

Founded in 1946, the Society is a professional membership association of more than 3,700 corporate and assistant secretaries, in-house counsel, outside counsel, and other governance professionals who serve more than 1,600 entities, including 1,000 public companies and private companies and non-for-profit organizations of almost every size and industry. Society members are responsible for supporting their boards of directors and executive management in matters such as board practices, compliance, regulation and legal matters, shareholder relations, subsidiary management and sustainability. Visit societycorpgov.org for more information.

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