The COSO draft governance framework is an important global initiative that seeks to unify principles across internal control, risk, and corporate governance. At Hyphen, we exist to create better working lives through well-governed organizations. We follow global efforts that promote governance excellence and are deeply appreciative of COSO’s leadership
Below are our comments and suggestions, which we believe would enhance the clarity, coherence, and practical utility of the draft:
1. Rethinking Governance Definitions in COSO’s Draft Framework
The current definition limits governance to the oversight and processes by which the board and management guide strategy and shareholder value. We believe this overlooks:
- The systemic nature of governance, which also includes principles, structures, and rules—not just processes.
- Governance’s role in strategy development, not just in execution.
We recommend adopting a broader definition, such as the Brazilian Code of Corporate Governance:
“Corporate governance is a system formed by principles, rules, structures, and processes by which organizations are directed and monitored, with a view to generating sustainable value for the organization, its shareholders, and society in general. This system guides the actions of governance agents and other individuals within an organization in the search for balance among the interests of all parties, contributing positively to society and the environment.”
2. Structuring the COSO Draft Governance Framework Around Value Creation
a. Clarify Component Roles
The six components outlined in the draft do not collectively present a holistic framework that fully reflects the breadth of governance as defined. For example, “Oversight” is listed as a standalone component, whereas in practice, it is a function performed through governance structures—such as the Board (oversight), management (execution), and internal audit (assurance).
This treatment risks confusing roles with structural elements and may lead to duplication or misinterpretation. A more coherent approach would be to embed oversight within a broader “Structure” component, recognizing how different agents operate within defined roles and responsibilities.
b. Link Components to Governance Purpose
More importantly, the current component model does not offer a clear lens that connects each element back to the purpose of governance—which is to create and sustain value in a balanced, ethical, and effective manner.
We suggest reimagining the framework through a value-centric model, one that categorizes components based on how they contribute to value creation. One such framing could be:
| Role | Components |
| Driver | Purpose, Values, Objectives |
| Navigator | Strategy, Performance Management |
| Enabler | Culture, Structure, Rules of Business |
This structure helps users intuitively understand how governance operates as a system:
- Driven by clarity of purpose and values
- Navigated through strategy and performance oversight
- Enabled by cultural alignment, structural roles, and codified rules
Such a lens not only enhances internal coherence but also allows governance practitioners to align their actions more explicitly with the overarching objective of sustainable value creation.
3. Refine Principles to Normative Statements
Across the framework, many of the stated “principles” appear more like process activities than true guiding principles. This applies to several components of the framework—not just strategy.
We propose rephrasing to principles that guide governance judgment, such as:
For example, under the strategy component, the listed principles include:
- Principle 7: Define Purpose and Core Values Strategy
- Principle 8: Develop and Communicate the Strategy
- Principle 9: Execute the Strategy
- Principle 10: Measure Performance Against Strategy and Adjust
While these are important actions, they function more as steps in a process rather than normative statements that guide governance decision-making and behavior.
We recommend reframing the principles across all components to reflect values or standards. Continuing with the strategy component as an illustration, more appropriate guiding principles might include:
- Inclusiveness: Strategic planning should incorporate diverse stakeholder perspectives.
- Flexibility and Adaptability: Strategy must remain responsive to evolving risks, opportunities, and environmental shifts.
- Balance of Time Horizons: Strategy should reconcile short-term execution with long-term sustainability and value creation.
A similar principles-based approach can be applied across other components, providing a clearer foundation for governance judgments and practices.
Conclusion
We once again commend COSO for its leadership in enhancing global governance practices. With these refinements, the COSO draft governance framework can become a stronger and more cohesive tool for global organizations.
We welcome the opportunity to continue engaging in this important dialogue and look forward to future collaborations that further elevate governance standards worldwide.
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