Eddie Leschiutta recalls the early days of his career as an accountant. “When I was a new partner signing off on financial statements, the prospect of dealing face to face with corporate boards was a little intimidating,” he admits. “Now when I go in to speak to them about new governance rules, I joke that the shoe is on the other foot. There’s a lot of apprehension among board and audit committee members now,” Eddie observes, “and it’s completely understandable. But it’s also time to recognize that the new corporate responsibilities are here to stay, and there’s no point in fighting city hall.”

Managing risk in today’s environment
Eddie’s in a good position to understand the downside of not recognizing — or addressing — the need for change. He’s been helping organizations successfully navigate all types of business risk for almost a quarter century. A native of Montreal and a graduate of McGill University, Eddie was recently appointed the national leader of Deloitte’s Enterprise Risk practice. And he couldn’t have arrived at a more tumultuous time. “The risk issues that companies have to deal with today are very different,” says Eddie. “Information security, new legislation and accountability, complex rules and complex transactions, the impact of world events, environmental risk — it’s almost overwhelming.” But in terms of day-to-day business, he adds, “one of the biggest risks is not recognizing the gravity of new accountability and governance requirements.”

Getting the message across
Accordingly, Eddie spends a good deal of time ensuring that his clients fully understand the governance expectations for boards and audit committees. Inevitably, he meets with some incredulity and frustration. “I have to remind them not to ‘shoot the messenger’ when I explain the scope of change required,” he says. Prior to the CEO & CFO certification rules, both for Canadian and U.S. registrants, board members weren’t asked to be intimately involved with the day-to-day workings of the company. Their responsibility was to prepare for meetings by doing the required reading and showing up three or four times a year. The audit committee had limited responsibilities in the area of financial reporting. Now both roles have been significantly expanded, but the edges are still fuzzy.

It helps to understand the spirit of the law
Eddie’s response to this confusion and frustration is education. He recalls a recent presentation on the subject of new governance requirements to a group of board members for a large consumer products company. “They said, ‘Wait a minute, we’re not management! How do we address these rules? Where does our responsibility begin and end?’” But once he takes clients through the logic supporting the new governance expectations, says Eddie, “people tend to calm down. Understanding the spirit of the law helps them see that it’s not strictly a punitive policy; that there is an upside in the form of more robust processes and improved stakeholder confidence.”

Getting past the education process usually leads to a practical solution: steps to certification, analysis, action plans that have a beginning and an end, and clearly defined responsibilities for the board, the audit committee and management. “Eddie gave our board the big-picture perspective on our increased responsibilities,” says Pierre Perras, Bell Nordiq Group’s audit committee chair. “He helped us understand that there is a significant upside to making excellent governance a competitive advantage.”

Legislation and the implementation dilemma
In terms of action plans, Eddie points out that “market reform legislation established the governance requirements, but it didn’t specify how individual organizations should implement them. Implementation depends on each company’s operations, culture and risk profile.” To bring the situation into focus, Eddie and his Deloitte colleagues have developed a comprehensive governance readiness service that encompasses all of these areas:

• Educating boards, audit committees and management on the new governance rules
• Interpreting how these rules apply to each group
• Mapping out a high-level strategy for responding to the new rules
• Documenting the specific responsibilities
• Designing a monitoring program to ensure ongoing compliance

How do you implement whistleblowing or antifraud programs?
The compelling new requirements raising a lot of questions are the whistleblowing and antifraud programs being put into place by all publicly traded companies. Many organizations are struggling with the implementation plan. They want to know: How much should the board do and how much should management do? What’s our competition doing? How much does it cost? How do we determine if it complies with the regulations? These may be typical questions, says Eddie, but there are no typical answers. “The very fact that there seems to be room for interpretation in managing new governance expectations is a source of confusion,” says Eddie. “My suggestion is always the same — don’t look for ways to minimize your compliance. Look for opportunities to embrace the spirit of the new governance rules, and it will become a competitive advantage.”

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