It’s just a word … right? Implications of the shift from ‘verify’ to ‘validate’ in Principle 4 of the ASX8
The ASX Governance Council are currently undertaking consultation on the Fourth Edition of Corporate Governance Principles and Recommendations (colloquially known as the ASX8).
The updates are both substantial and look to contemporise the ASX8. There has been a lot of effort put into articulating the desired guidelines for culture, diversity, effectiveness of the board, whistleblowing, anti-corruption and bribery, and disclosure.
The change in one word caught my eye. I had to stop and understand the difference. Principle 4 has been updated to state:
“Produce corporate reports of high quality and integrity: A listed entity should have formal and rigorous processes to validate the quality and integrity of its corporate reporting.”
Previously, it read:
“Corporate reporting: A listed entity should have formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting.”
It struck me that the wording has shifted from ‘verify’ to ‘validate’. I consulted the dictionary to double-check my clarity on the subtle difference between these words.
It came down to one really simple difference between the two:
• Validation: Are we building the right reports?
• Verification: Are we building the reports right?
Subtle language shift—monumental shift for Directors, Executives and Company Secretaries.
It appears that the intent is for organisations to ensure that they are not just following defined reporting standards (e.g. a mindless compliance mindset). We now have to make informed decisions on whether those reports are accurately representing the organisation.
Combine this with the additional requirement of ‘integrity‘ rather than just quality, and we have the potential for a substantial shift in Corporate Reporting from just formulaic responses.