The paper, Creating value through governance – towards a new accountability, asserts that sound corporate governance can contribute to creating value for society. It explores the history of corporate governance practices, including academic research around governance and whether it prevents corporate failure, the impact of the global financial crisis, and a lack of consensus about what comprises good corporate governance and what can be expected from good governance. It argues that regulation of governance and risk management has not helped to create a healthy corporate culture or effective boards, and that existing governance systems can be considered to have made it harder to hold people to account for company failures.

The consultation paper suggests that governance should be about supporting and enabling business to create value sustainably, "taking and managing risk and responding flexibly to uncertainty without suffocating entrepreneurial flair". In order to do this, a new accountability framework for governance is proffered that is based on three components, being 'performing', 'informing', and 'holding to account', and how these three components relate to three different 'interfaces', being between executive management and boards, boards and institutional shareholders, and institutional shareholders and 'savers' (providers of capital).

Discussing the 'informing' aspects of governance, the paper considers existing measures of performance to be unreliable and that "nobody knows what 'good' performance is". It notes:

Financial statements do not convey whether a company is in a better position to create future value at one balance sheet date than at an earlier date. ‘Profit’ is an inadequate, easily gamed, measure and investors lack suitable alternative metrics for determining the true value of companies.

The paper then explores the characteristics that disclosed information should have, arguing that "[c]ompany financial reports should convey whether a company has created value over the reporting period and whether its ability to create value in future has improved". In this regard, it sees the International <IR> Framework issued by the International Integrated Reporting Council (IIRC) as containing key points on value creation, performance and reporting and notes that "if it leads to a more informed approach to value and how to measure its creation and its costs, companies should become better at creating value for shareholders and society". However, it goes on to note two additional considerations:

• Reporting on the various capitals should include an indication of the confidence or accuracy of measures and employ something like a ‘confidence accounting’ approach
• Integrated reports should include disclosure on governance, including how the board ensures that it has the right culture and values embedded in the organisation

The paper goes on to consider value creation and national economic growth, positing that many measured profits are created by value transfer rather than value creation and that is difficult to distinguish between profit and economic rent (charging a higher price than would exist with proper competition). Accordingly, the paper puts forward the view that there is a pressing need to find better measures of performance that can distinguish between 'value' from competitive profit and economic rent, and that "governance can be an engine for economic growth if... management, board directors, shareholders and policymakers keep in mind that governance is about creating value".

The consultation paper is open for comment until 31 August 2014.  Click for press release (link to ACCA website).