In the past few years in Iran there have been publications of guidelines set out by the Central Bank on issues such as: internal control systems based on Audit and Risk Management and the improvement of corporate governance in the banks organizations. As a result, similar to other countries, Iranian banks are also in the process of implementing corporate governance principles and systems. With the support of the Central Bank and Tehran Stock Exchange, corporate governance is developing in Iran.
However, taking into account the qualitative, complex and interconnected nature of corporate governance principles, its’ assessment is difficult. Also, it is not clear which bank has been more successful so far, what planning is necessary for each to continue to work, and which bank has shown better accountability and internal supervision.
According to evidence, an appropriate corporate governance system will lead to improvement in performance. Also, effective implementation of corporate governance rules lower financial crimes such as embezzlement. Still the question remains: What do these effective rules entail? How can managers understand whether the rules implemented in their organization are efficient and up to date? Hence, the necessity of a reference and tool to assist firms in assessing the mentioned system can be felt; an instrument that helps inform senior executives; assists in creating policies and plans to promote corporate governance in banks and financial institutions.
One such a tool is the Corporate Governance Scorecard. The corporate governance scorecard, is a tool to track and measure progress in the implementation of corporate governance procedures. An organizations’ management can use this tool to assess the corporations’ current situation, compare it with what has been introduced as the best practice, and plan their progress and continuation.
Considering the lack of this tool in Iran and the need to assess the newly implemented procedures in all firms, especially banks, we’ve tried to find effective criteria and assign weights to evaluate the corporate governance system and devise a useful tool for Iranian banks by using Germany’s corporate governance scorecard as a model.
Due to the need for specialist knowledge and experience, and the study’s purpose in finding criteria and assigning weights to them, the Delphi method was conducted in two rounds to collect the necessary data. The initial questionnaire was developed through library research methods and interviews with independent specialists. Then it was presented to a panel of 25 and 20 corporate governance and banking experts (in Iran) in the first and second rounds respectively. Descriptive statistical methods were used to summarize and assort the results. Also, non-parametric statistical methods were used to evaluate the level of consensus of opinion among the experts and decide the duration of the Delphi process.
The final result (table provided) was a scorecard with 5 main criteria and 48 sub-criteria designed in the Excel software.
Hopefully this source and tool will help Iranian banks in evaluating and advancing corporate governance principles and systems. In my next articles I will attempt to elaborate more on the sub-criteria of each of the main criteria.