Boards need to consider a wide range of compliance obligations as part of their oversight role. These may be imposed by regulators, government or donor-funding regimes, federal, state or local legislation. Industry based standards may apply in the sectors in which the company operates. While meeting mandatory compliance requirements is not optional, board directors need to satisfy themselves that the company has systems in place to meet these and that they receive relevant and timely reports regarding any potential or actual non-compliance.
Certainly, the board does not want to be snowed under by compliance requirements that take time away from more strategic considerations, but there may also be a range of reasons why a board chooses to comply with non-mandatory standards or requirements:
Firstly, to reduce risk - adopting an industry standard, even if it's not mandatory may give the best assurance to the board that risks have been minimised through adopting practices that are widely considered to be effective.
Secondly, to benchmark performance - compliance with non-mandatory standards may be a way of ensuring the company is meeting its customers' needs and also provides evidence to demonstrate performance improvements.
Thirdly, compliance to a non-mandatory standard may give you a competitive advantage. Large corporate or government clients may look to standards as a way of assuring themselves that their suppliers are up to scratch. If you can demonstrate compliance to a standard that's relevant to your customers, that can be a wise strategic choice.
From an asset management perspective, many companies choose to use the ISO 55001 international standards for an asset management system as a guide for their asset management practices, even if they don't seek certification. In the same way as many non-listed companies choose to use the ASX Corporate Governance Guidelines as a guide to best practice, the board will have some reassurance that a robust system is in place.