What is a corporate monitor?

What is a corporate monitor? It’s a person or company assigned to keep an eye on your company, often following a turbulent time. 

It’s no secret that more responsibility falls on corporate leaders these days. Because of that,  corporate monitors have emerged as pivotal players. 

This guide will demystify the role  – outlining what they are, their responsibilities, and the impact they might have on your business if you ever have to deal with one.

A corporate monitor is an independent third party appointed to ensure that a company complies with specific standards or legal agreements. 

Typically, their appointments follow a low point in the company’s history, such as a corporate misconduct case, a legal dispute or a regulator probe that ended poorly. Events like these usually require the company to change its fundamental operations, policies or practices – in other words, the things directors need to oversee.

Their main goal is to verify that the company adheres to the agreed-upon terms and report on its compliance efforts. Such reports are often made simultaneously to the company itself (as a form of feedback) and the regulatory authority involved (to track success).

It will depend on the company, the situation that prompted the monitor, and the progress they need to measure. 

But, in general:

• Corporate monitors analyse a company’s existing compliance and governance frameworks to identify areas that are out of sync with the targeted outcome. 
• They’ll identify reforms that need to take place for these frameworks to reach the desired standards. Usually, they’ll do this with constant input from the firm’s corporate leaders. 
• They oversee the implementation of these reforms. Common examples include monitoring the company’s efforts to improve its compliance programs, internal controls, and ethical practices.
• They compile reports on the company’s compliance progress within the agreed work areas and timeframes.
• They serve in an advisory capacity during their time as a monitor. This is never an official duty but a common trend, given the nature of their role. In some respects, their external voice and outlook give them a similar function as an independent director.

The appointment of a corporate monitor can significantly impact a company. 

First of all – let’s acknowledge the negatives – it is often a warning, a wake-up call, a sign that the company has not met the standards of significant external stakeholders. 

This development can strain reputations, finances and other internal resources as the company adapts. 

On the other hand, agreeing to a monitor demonstrates a commitment to rectifying past mistakes and changing practices going forward. The long-term benefits often outweigh the challenges, as enhanced compliance frameworks and ethical practices can lead to improved operations, reduced risk of future legal issues, and a stronger reputation in the marketplace.

Whether the monitor is there to change something about the board itself or another aspect of governance, make no mistake; the board should pay attention to the monitor’s activities. 

Above all, think of the situation as an opportunity for increased transparency and a culture change. Use it positively, and don’t let it spark unnecessary fear. 

Practically, directors should ensure the monitor has the access and understanding they need to carry out their duties. Work with them on this, providing them with concrete information and metrics wherever relevant. 

Ensure you receive regular updates on their work so nothing surprises you, and be sure to engage with their feedback – it may help speed your company’s transition toward the standard that stakeholders want.

The role of a corporate monitor is crucial in today’s corporate environment, serving as a bridge between regulatory authorities and companies working to correct past misdeeds. 

Monitors help rebuild trust and secure future success, so it’s essential to work with them and embrace the opportunity as a pivotal step towards sustainable business practices and long-term growth.